There’s good news today for anyone interested in using funds from theirpots to obtain professional financial advice, who had previously would have been forced to pay tax on every penny taken. As of April 2017, savers of all ages who are looking to improve their savings prospects for will have the option of withdrawing a maximum of £1,500 for independent financial advice, which will be 100% tax-free. Plans unveiled by the government this week confirm that those looking to make use of the offer will be able to take out a maximum of three lump sums of up to £500 each, which must be used for the purposes of obtaining independent and retirement advice.
The statement from the government followed the initial publication of theAdvice Allowance, which is now set to go into effect as of April.
Advocates have welcomed the initiative as one that should have been brought into effect many years or decades ago. They insist that any policy that penalises savers by way of taxation simply for looking to gain advice and input on how to make the most of their finances represents an entirely unjustifiable expense. It was decided after an eight-week review that taxation on such funds should be at least partially lifted.
As a result, the allowance of £500 will be available for use tax-free up to three times maximum, but only once during any tax year. The idea is that those taking part should be able to obtain independent financial advice at different stages during their lives – as they begin saving, closer to retirement and perhaps when they are just about to retire, for example.
“Pensions and savings decisions are some of the most important a person will make during their lifetime,” said economic secretary to the Treasury, Simon Kirby.
“This allowance will help people get the vital financial help they need to plan for their retirement.”
The move represents the latest initiative by the government to actively encourage more people of all ages to take a more proactive and thoughtful approach to their own financial futures. Recent research suggests that while just 22% of UK adults in the run up to retirement are fully aware of what their pension pot is worth, a worrying 14% stated that they would have sufficient confidence to plan for their retirement without professional advice and input.
In terms of financial benefits, additional research suggests that on a total pension pot with a value of at least £100,000, those who seek independent financial advice save approximately £100 per month, when compared to those who don’t seek any financial advice whatsoever. In addition, competent financial advice has been shown to boost annual retirement income by more than £3,500 per year, when compared to those who seek no advice whatsoever.
The key message from the government is that this advice can and should be accessed at the earliest possible juncture, rather than simply waiting until later life to begin making adjustments. The earlier any saver begins planning for their retirement, the broader and more attractive the options available to them.