The report draws heavily on new qualitative research conducted by Bdifferent exploring employer’ reactions to two new initiatives that Her Majesty’s Treasury is considering:
Increasing the tax exemption around employer-arranged pensions advice from £150 to £500.
Introducing a Pensions Advice Allowance which allows DC savers to withdraw up to £500 from their DC pension funds without incurring a tax penalty, provided that this amount is used to purchase pre-retirement advice.
While employers indicated that their employees are not overly interested in pensions, they noted that employees become more engaged as they approach retirement. This suggests that employees would value employer-provided financial advice at this stage.
Employers are very supportive of the Pensions Advice Allowance which would allow DC savers to withdraw up to £500 from their pension funds to pay for advice and indicated that they would promote this to their employees.
The £500 tax exemption for employer-provided advice was of most interest to those employers who already provided access to advice to their employees.
However, it may be challenging to involve smaller employers, where there is no named person responsible for pensions, in the provision of financial advice in the workplace.
Teresa Roux, Founding Director, Bdifferent said: “While employers are generally supportive of the Pensions Advice Allowance, the research highlights the different attitudes of employers based on culture and size of scheme and some of the challenges for implementation.”
Melissa Echalier, PPI Senior Policy Researcher said: “While it has been argued that employees are not interested in pensions, this research supports the view that they become increasingly interested as they approach retirement. The provision of at-retirement financial advice in the workplace could be one of the routes to increasing take-up of financial advice.”
Philip Brown, Head of Policy, LV= said: “It is encouraging that employers are open to helping their employees get access to financial advice at retirement. We called for an increase to the advice tax allowance for employers in our response to the Financial Advice Market Review as this change, alongside the introduction of the Pension Advice Allowance, will make it far easier for consumers to get affordable professional advice. This is a real opportunity to increase access to regulated financial advice through the workplace and help many more people get the best outcome in retirement.”
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