15 Jan 2018 Up to 1.3 million recipients of pension advice could miss out on £236m of potential tax savings, if advisers and employers do not act on new legislation in time for April.
Employees can now sacrifice up to £500 taxable salary p.a., in return for a tax-free payment from their employer, reimbursing them for any fees paid for pension advice. Salary sacrifice schemes – such as Childcare Vouchers or Cycle to Work schemes – allow employees to swap taxable salary for a non-taxable benefit in kind. In the case of pension advice, this can save people up to £310 p.a. in tax and national insurance.
However, the new legislation has gone largely unnoticed since receiving Royal Assent in November. No Employee Benefits Platform has built a scheme to help employers in the same way as they have with Childcare Vouchers and Cycle to Work, due to the complexities involved. Consequently, very few employers have plans to offer this benefit.
If this does not change in time for the end of this tax year, 1.3m clients could miss out on an average saving of £187 for the 2017-18 tax year.
Pension Advice Vouchers – launched by VouchedFor in December – is the only pension advice salary sacrifice scheme to have launched in the wake of this new legislation. Adam Price, MD, comments “Access to good financial advice is so important right now, and this government initiative reduces the cost by up to 62%. But very few employers yet offer this benefit. It’s especially urgent for the 1.3m employees who already pay for advice each year – they only have until April if they want to capture their first year’s savings.”
Adam continues with this advice:
Commenting on VouchedFor’s innovation, Adam adds “We found we had all the necessary ingredients to bring this scheme to market quickly, just in time for the first April deadline. Our VouchedFor verification system makes it possible for us to contact any UK IFA on an employee’s behalf and verify the validity of their request for fee reimbursement. And of course, VouchedFor makes it easy for any employee who needs a good IFA to find one. Finally, with Hatch – our new hybrid robo-coach financial planning service – we have a low cost solution for those employees who fall below advisers’ minimum criteria.”
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