Changes to the tax rules

Posted by Gillian McCue on
Tax changes to allow a new way for members of money purchase and hybrid pension schemes to finance the provision of regulated independent financial advice to access pensions flexibilities.

At the 2014 Budget, the Chancellor of the Exchequer announced sweeping changes to the tax rules applying when an individual decides to access money purchase pension savings.

Flowing on from that is the concern for members to be properly advised (and presumably to take away some pressure from The Pensions Advisory Service and Citizens Advice). From 6 April 2017, a new category of authorised member payment is being created called a "pension advice allowance payment". 

In other words, members of money purchase and hybrid (i.e. mixed defined contribution/defined benefit) schemes will be able to take a tax free amount of £500 from their scheme, to cover the expense of taking regulated independent financial advice. As well as advice itself, the payment may cover implementation of the advice.

A person is entitled to three separate pension advice allowance payments over the course of their life, but no more than one in any given tax year. For the payment to be authorised for tax purposes, the following conditions must be met:

  • The payment must not exceed £500.
  • The payment must be requested in writing by the person receiving the advice.
  • The request must contain a declaration that no more than two pension advice allowance payments have been previously made overall, and no payment has been made in the tax year in question, in respect of them.
  • Payment must be made directly to the financial adviser.

About the Author

Gillian is an Associate specialising in pensions and benefits advising on all employer and trustee pension scheme responsibilities.

Gillian McCue
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