Value in at-retirement financial advice for older workers
A recent report from the Pensions Policy Institute (PPI), which was sponsored by pension provider LV=, identified a growing engagement in pensions as employees get older.
The report, “At-retirement financial advice in the workplace”, drew on new qualitative research conducted by Bdifferent and explored employer reactions to two new initiatives being considered by HM Treasury.
The first is to increase the tax exemption around employer-arranged pensions advice from its current level of £150 to a more realistic £500.
Secondly, HM Treasury is considering the introduction of a new Pensions Advice Allowance, giving savers with pension pots the ability to withdraw up to £500 tax-free in order to pay for pre-retirement financial advice.
While the research found employers indicated that their employees are not overly interested in pensions, they noted that employees become more engaged as they approach retirement.
This suggests that employees would value employer-provided financial advice at this stage in their careers.
Employers were found to be very supportive of the proposed Pensions Advice Allowance which would allow defined contribution pension savers to withdraw up to £500 from their pension pots to pay for advice.
Those employers responding to the survey indicated that they would promote this new £500 allowance to their employees.
The £500 tax exemption for employer-provided advice was of most interest to those employers who already provided access to advice to their employees.
However, it may be challenging to involve smaller employers, where there is no named person responsible for pensions, in the provision of financial advice in the workplace.
Teresa Roux, Founding Director, Bdifferent said:
“While employers are generally supportive of the Pensions Advice Allowance, the research highlights the different attitudes of employers based on culture and size of scheme and some of the challenges for implementation.”
Melissa Echalier, PPI Senior Policy Researcher said:
“While it has been argued that employees are not interested in pensions, this research supports the view that they become increasingly interested as they approach retirement.
“The provision of at-retirement financial advice in the workplace could be one of the routes to increasing take-up of financial advice.”
Philip Brown, Head of Policy, LV= said:
“It is encouraging that employers are open to helping their employees get access to financial advice at retirement.
“We called for an increase to the advice tax allowance for employers in our response to the Financial Advice Market Review as this change, alongside the introduction of the Pension Advice Allowance, will make it far easier for consumers to get affordable professional advice.
“This is a real opportunity to increase access to regulated financial advice through the workplace and help many more people get the best outcome in retirement.”
Here at Informed Choice, we would welcome the opportunity to speak to groups of employees, especially those approaching retirement age, to help them understand their choices and options for taking cash from their pension pots.
Do give me a call on 01483 274566 or email firstname.lastname@example.org if you are an employer in Surrey who has older workers that could value at-retirement financial advice.