New flexibilities introduced in April 2015 altered how pension pots can be accessed, meaning savers now have many more options of what to do with their accrued investments than previously - where an annuity and a percentage taken tax-free what the most that could be done.
Coupling the above with automatic enrolment in the workplace means that more and more people are now looking at pensions earlier in their lives and estimates set 8 million people to be newly added to pensions by the end of the decade.
To help these people with making the right choices the Government is committed to making sure the right advice is sought and for some the cost of good financial advice can be off-putting. In order to combat this the government is starting a consultation to get ideas on how to implement a tax-free allowance for pension holders.
An allowance would be allowed of £500 and taken from the pension pot tax-free at anytime before the age of 55.
Research shows the those seeking out advice can be better informed and therefore over the long-term increase their savings by around £98 per month. However, currently only a third of people seek pension advice.
Employer arrange pensions advice has already been tax exempt for up to £150 but is now raised to £500. If the employers and this new personal allowance were to be combined that would provide up to £1,000 for excellent pension advice.
Current implementation plans show that the client would instruct their pension provider to pay the financial adviser directly by withdrawing funds from the clients pension pot. There are thoughts of allowing multiple uses of the allowance, so pension holders can use their pension fund to seek advice at various life events.