Using the pensions advice allowance and the tax exemption for employer arranged pensions advice means there is a £1,000 per employee incentive to engage them more with their pension.
This coupled with the announcement this week that the government has now raised the original £500 pensions advice allowance to £1,500 (to be used equally in three separate tax years) is a real shot in the arm for pension engagement.
The pension advice allowance can be used at any time in a person's pension savings lifetime and it can be used up to three times - £500 allowance each time. The tax exemption is an annual benefit of £500 per employee.
So looking at the practicalities of this in the workplace for employers trying to engage their DC members, this could enable:
- Group education sessions at early career, mid career and late career, followed by 121 pension advice clinics, or
- Group education sessions at a point when the default investment strategy starts to bite - say 10 years out from retirement, half way through that default period, say 5 years out from retirement, and 1 year from retirement, again followed by 121 pension advice clinics at those stages
Either of these approaches would help to ensure staff are fully engaged with their DC pension and to give them support at key times to help with their retirement planning and overall financial wellbeing.
The government has confirmed that the incoming pensions advice allowance can be used alongside the tax exemption for employer-arranged pensions advice, enabling employees to access up to £1,000 of tax-advantaged financial advice in a tax year.