Employee reluctance to access pension advice not only a cost issue

In the Government’s second Finance Bill 2017, a new income tax exemption to cover the first £500 worth of pensions advice provided to an employee was introduced.

It will be implemented retrospectively from April 2017 and allow advice not only on pensions, but also on the general financial and tax issues relating to retirement for employees. The changes replace existing provisions which limited the exemption solely to pensions advice and was capped at £150 per employee per year.

Jonathan Watts-Lay, Director at WEALTH at work, says: “With less than a third of people taking financial advice on their pension, anything that encourages employees to do so has to be a good thing.

“But as we all know, cost isn’t the only issue when it comes to employees taking financial advice. I believe the reluctance comes from individuals not understanding what financial advice is, or what it can do for them.

“In contrast, when we look at the results of employees who have attended a pre-retirement education seminar in the workplace, over 70% go on to request further information and advice following a session. The difference is that following financial education, employees will realise how complicated pension decisions can be and will gain an understanding of how financial advice can help them.”

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“Supporting employees with financial education and guidance will help them to understand their needs in more detail to make better decisions pre-retirement. This then drives the process of taking financial advice, ensuring that employees understand their personal financial situation and are able to implement their retirement strategy in a tax efficient way.

The benefit here is that employees save effectively and can afford to retire, something in both the employee’s and employer’s interests.”