Budget 2016: Advice allowance for pension to be raised after recommendations from the Financial Advice Market Review

 
Billy Bambrough
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The Financial Advice Market Review found a “clear need for intervention” in the financial advice industry, with consumers suffering from an “advice gap” (Source: Getty)

Changes to the pensions advice allowance mean that people will now be able to dip into their pension pots to pay for pre-retirement financial advice.

Building on the recommendations from the Financial Advice Market Review (FAMR) earlier this week, the government will open a consultation this summer on whether to allow people to withdraw £500 tax free before the age of 55 from their pension to redeem against the cost of financial advice. The exact age will be determined by the consultation.

Other changes mean the tax and national insurance contribution relief available for employer arranged pension advice will be increased from £150 to £500 from April 2017.

The long-awaited FAMR found a “clear need for intervention” in the financial advice, with consumers suffering from an “advice gap”.

Co-chaired by Charles Roxburgh, director general of financial services at HM Treasury and Tracey McDermott, acting chief executive of the FCA, the FAMR also calls on the government to consult on whether to narrow the definition of regulated advice "so that it is based on a personal recommendation".

"Crucially, this would create a single definition for regulated financial advice and remove some of the barriers that exist for firms wishing to offer guidance services," FAMR said.

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