Skandia, part of Old Mutual Wealth, has used its pre-budget submission to the Treasury to call on the Government to make it easier for employers to make quality financial advice available to their employees by extending the tax relief available.
In December 2004, the Government introduced an exemption from income tax where an employee receives pension advice, specific to them, financed by an employer up to the value of £150. This was providing all employees could access the service. Where the advice relates to more than pensions or is valued at more than £150, the employee is taxed on the value of the benefit provided.
Skandia believes that the amount of tax relief available should be increased to at least £300, to account for inflation and the wider financial planning issues that should now be taken into account.
As the workplace increasingly becomes the focal point for personal retirement savings, Skandia feels it is imperative that employees receive the necessary help to make the right decisions about their retirement savings. With the introduction of auto enrolment into workplace pension schemes and the complex decisions that have to be made when an employee enters retirement, financial understanding and advice has never been more important.
Skandia believes that the tax exemption should go further and cover more than just pensions. This is because pensions are just one financial product and decisions, particularly whether to join a scheme or not, should be taken together with an assessment of the individual’s other assets and liabilities.
Similarly, decisions about retirement income, if they are to result in the best outcome for the individual, should take account of more than just pension savings.
To limit the extra costs, and to further increase the chances of employers engaging with the process, they should be given the option to restrict the provision of advice to new employees, those approaching retirement and those approaching a significant lifestyle event.
Bob Champion, Retirement Product Lead at Skandia, comments:
“Retirement planning is a complex area but as an industry we are sometimes guilty of expecting the consumer to have a high level of knowledge. It is the same with financial planning as a whole. As a person’s workplace becomes their major reference point with regard to their pension, it makes sense for the employer to be able to help their employees get access to quality advice.
“Extending the tax relief available could encourage more employers to engage with the process and ensure that more of their employees receive a better financial outcome, in retirement in particular.”