The Treasury has outlined plans to allow people nearing retirement to take up to £500 out of their pension pots tax-free to put towards the cost of financial advice.

The Pensions Advice Allowance will come into force from April 2017.

Rather than being restricted to traditional face to face advice, however, the Government has opened it up to newer technology-driven forms.

The report stated: “Automated advice has the potential to deliver affordable advice to the mass market. It is the government’s intention that the Pensions Advice Allowance could be used to pay for automated as well as face to face advice.

“FCA rules on the facilitation of adviser charging permit charges to be taken from an investment product by a regulated advisory firm or regulated adviser.

“Therefore, there is no restriction in principle that would prevent the Pensions Advice Allowance being used for automated advice.

“The government would like to understand any administrative difficulties that pension providers or advisory firms may face in offering the allowance for automated advice services.”

An individual will be able to receive advice on all the financial products that contribute towards their retirement income, such as multiple pension pots and other assets like ISA savings, officials said.

The Government is asking for views on potential pitfalls with the new scheme and has launched a public consultation including questions on from what age people should be allowed to use it.

See full list of questions below.

Economic Secretary to the Treasury, Simon Kirby, said: “Pensions and savings decisions are some of the most important a person will make during their lifetime.

“It is therefore vital that people can access the financial help they need and feel confident choosing the support that works for them in their retirement.”

The Treasury said that the new allowance goes further than the current provision which only allows people to get advice on the pension pot from which the advice fee is taken. It will help people with the upfront cost of advice and allow them an opportunity to consider their retirement plans carefully in advance of taking their pension.

The Pensions Advice Allowance was first announced in Budget 2016 after a recommendation from the Financial Advice Market Review (FAMR), which suggested that high quality financial advice can have a significant impact on retirement incomes if received early.

Question 1
How widely are the existing provisions for facilitated adviser charging used? The government welcomes evidence from pension providers and advisers on the types of products and transactions which use adviser charging.
Question 2
The government welcomes views on the proposed design of the Pensions Advice Allowance.
Question 3
The government welcomes views on this option. Are there any other ways to limit the number of times people can use the allowance?
Question 4
What age should the allowance be available from?
Question 5
How could consumer awareness of the allowance be increased?
Question 6
Are people with protected characteristics under the Equalities Act 2010, or any consumers in vulnerable circumstances, impacted by the policy proposed?
Question 7
The government invites comment on the proposed scope of the Pensions Advice Allowance.
Question 8
The government welcomes evidence on the proportion of products or schemes that currently offer facilitation of adviser charging.
Question 9
How could the government maximise access to the Pensions Advice Allowance?
Question 10
How much of the pension market would be likely to offer the Pensions Advice Allowance to their customers?
Question 11
How do providers reduce the client’s benefits accordingly if they offer to facilitate adviser charging on products with a guaranteed income?
Question 12
Are there any difficulties in offering facilitation of adviser charging for products with other types of guarantee?
Question 13
The government welcomes views and evidence on any difficulties in offering the Pensions Advice Allowance presented by scheme rules or more generally in respect of members of occupational pension schemes.
Question 14
The government welcomes views and evidence on any difficulties in offering the Pensions Advice Allowance for automated advice models.
Question 15
Are there any other products or schemes for which it would be more difficult to offer the allowance? How could the government address these difficulties?
Question 16
Are there any other ways to mitigate the risk of fraud?
Question 17
Do you have any other information that does not relate to any of the consultation questions above that you feel would be beneficial to HM Treasury when designing and implementing the Pensions Advice Allowance?