Previously, issues had been raised about HMRC’s proposed approach, with fears that it could complicate shopping around at retirement. This is because, under previous plans, if an individual decided to switch provider when they brought an annuity, the tax free cash is paid by their original provider.
As a result, the new provider would have been required to contact the previous provider and request they pay a portion of the adviser charge from the tax free cash to the adviser.
However, the revised guidance now states: “A registered pension scheme might make a payment to a financial adviser for the cost of pension advice that is given to the member by the financial adviser in relation to the pension scheme.
“Such pension advice might be in connection with the suitability of fund choice, asset allocation, pension provider, pension taxation or checking against statutory limits.”
The guidance goes on to say: “Also, the advice could cover how to maximise income from the pension fund at retirement or how to maximise the return on existing pre-retirement pension fund or more general advice on the payment outcomes/risks of respectively choosing the type of pension to be taken; scheme pension, lifetime annuity or drawdown.”
As a result, if an adviser charged £500 for advice on the pension options for a member with a £100,000 fund, a tax-free lump sum of £25,000 will still be available, with the charge taken from the remaining £75,000 after it is passed to the annuity provider.
For more information, please visit www.milsted-langdon.co.uk
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