Treasury consults on Pensions Advice Allowance
HM Treasury has launched a consultation on the design of the new Pensions Advice Allowance which was announced in the 2016 Budget (see Pensions Bulletin 2016/11) and is intended to be available from 6 April 2017. The allowance is intended to enable those who have reached a certain age to access certain funds from their DC pension to redeem against the cost of financial advice.
The Government now proposes the following:
- Limiting the allowance to £500 per use, with possibly multiple uses permitted to enable individuals to get advice at different stages of retirement
- Allowing redemption of the allowance against all fully regulated advice services, including automated advice models (but not guidance services); and
- The creation of a new authorised payment rule under the Finance Act 2004 in order that unauthorised payment charges will not arise
The intention is to build on the existing adviser charging system that operates under FCA rules by which, in limited circumstances and on the instruction of the consumer, the pension provider transfers funds taken from the pension product directly to an adviser. But whilst under this system the advice should be limited to advice about the product from which the charge is being taken, the Pensions Advice Allowance would be more holistically “for the purpose of financial advice on retirement”. This could cover DB as well as DC pensions.
The Government asks for assistance on a number of matters such as the earliest age from which the allowance would be available (which would be before 55), how to maximise access to the allowance for consumers who hold pension products that do not currently offer adviser charging facilities and how the allowance could best be publicised. It is also concerned that as awareness of the allowance increases, fraudsters could see new opportunities and so calls for ideas on how this could be mitigated.
Consultation closes on 25 October.
Comment
It is not clear how this new facility may operate in relation to DC benefits delivered through occupational pension schemes. Importantly, it is intended to be voluntary, but trustees wishing to make it available may find that they have a number of hoops to jump over in order to do so.
Financial Assistance Scheme now closed to new applications from schemes
As announced back in March (see Pensions Bulletin 2016/09), the Pension Protection Fund has today closed its doors to notification of new claims.
Pensions Ombudsman has a name change
The Pensions Ombudsman Service is changing its name to The Pensions Ombudsman, or TPO when abbreviated.
The new name is similar in style to its main partner organisations – the Pensions Regulator (tPR) and the Pensions Advisory Service (TPAS). Its work and remit will remain the same.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
