Budget changes that affect financial education
Chancellor George Osborne scrapped the Money Advice Service in Iast week’s budget and also intends to replace the Pensions Advisory Service and Pension Wise with one new guidance body for retirement funding. Until their successors are finalised, Jelf believes this leaves a substantial gap, as these three services were key to delivering the ‘Guaranteed Guidance’ associated with Pensions Freedoms. In addition, the introduction of the Lifetime ISA leaves the under 40s with a quandary about which savings vehicle to choose.
Tax reliefs were already offered on employer-arranged pension advice up to a £150 limit per employee. Jelf Employee Benefits believes the potential increase to £500 is a step in the right direction but that further incentives are required to make financial education more mainstream.
Alan Millward, Managing Director - Financial Services, Jelf Employee Benefits says: “Financial education isn’t just about retirement planning - it’s about so many other areas including budgeting, saving for shorter-term goals, tax planning - all of which allow people to better manage their overall financial position on a day-to-day basis. Employers are becoming increasingly aware of the correlation between monetary concerns and a lack of productivity and engagement in the workplace but unless they can offset the costs in some way, their hands are tied as they simply can’t afford to provide the support they know their staff need.
“Employees are now faced with a choice about whether to save via an auto-enrolled pension, a Lifetime ISA or both, and this will lead to a lot of uncertainty amongst people about how best to save for retirement. If they can’t find answers, this could lead to an inertia – exactly what the Government was hoping to combat in the first place. Employers are in an unrivalled position to be able to support their staff with retirement guidance and other financial education and many more would be inclined to do so if they were encouraged by way of greater tax incentives.”
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