The report revealed that more than half (56%) of employers believed that the government should extend the tax exemption for employer-provided pensions advice to more than £500.
The cost of advice varies depending on the situation but it can be anything between £75 - £350 an hour, with the average cost of advice in the UK being around £150 an hour.**
The employer-arranged pension advice exemption is the amount an employer can spend on pension advice per employee in a year, without the individual incurring tax as ‘benefit in kind’. It can be used to provide workplace advice on pensions, and on general financial and tax issues relating to pensions, to help employees make informed decisions on saving for retirement.
£500 is unlikely to meet the financial pension planning needs of most employees. There needs to be a real incentive to make a difference for employees.
The report also revealed that nearly half (49%) of employers want greater clarity around the regulations for providing pension information in the workplace, so that businesses are able to talk openly to their employees about the value of the pension scheme without stumbling into giving financial advice.
Kate Smith, Head of Pensions at Aegon said: “Employers play a vital role in the retirement savings of their workforce, but they need a helping hand from the government to ensure employees are on the right track to financial security in retirement.
“While many employers are taking positive steps to raise awareness and improve their employees’ engagement with workplace pensions, there is a very real fear among employers that they could stray into regulated advice if they try to promote their pension plans to staff. Greater clarity of what they can and cannot say would be helpful. It would be great if the regulators could revisit this as part of their joint pension strategy.
“One way for employers to avoid this concern is to offer access to professional financial advice in the workplace. Some employers are prepared to pay for this.
“However, under current rules, if the advice costs more than £500, employees are liable to tax as a ‘benefit in kind' on the excess. Advice typically costs more than this which means employers are less likely to offer this valuable service. Doubling it to £1,000 could remove that barrier and create an incentive for employers to offer further support.
“Auto-enrolment has been a great start in getting more people saving for their retirement. But too many people undersave. We need to try to change people’s mind-sets and get them starting to think earlier about what they want from their pension. Helping people to access advice via the workplace could make all the difference.”
*Engaging with saving workplace pensions report – Data for the report was collected in the Autumn of 2017. Research was conducted in two parts: A survey with 189 participants from a mix of small to large businesses and across all industry sectors (2nd – 20th October 2017); and 15 in-depth interviews with participants from a range of business sizes and sectors (30th October – 24th November 2017).
Almost 25% of survey respondents were micro, small or medium-sized businesses reflecting the requirement for all existing employers to automatically enrol staff into a pension from 2017 onwards. Interviewees included a mix of pension technical specialists, reward managers and respondents from the boardroom to provide insight into the understanding of pensions engagement at every level.
**Money Advice Service website
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