From 6 April 2017 employers’ will be able to provide employees with pensions advice costing up to £500 a year without triggering a taxable benefit. The new exemption will cover not only advice on pensions, but will also extend to advice on general financial and tax issues relating to pensions. The exemption will replace the current exemption, capped at £150 a year, available solely for pensions advice.
Money purchase annual allowance to fall to £4,000
Since 6 April 2015, individuals aged 55 and over have been able to flexibly access pension savings in a money purchase (defined contribution) scheme. To prevent ‘recycling’ of contributions (withdrawing and reinvesting to take advantage of the associated tax relief), a lower annual allowance, the money purchase annual allowance, applies (subject to certain exceptions) where a pension pot has been flexibility accessed. The allowance is set at £10,000 for 2016/17 but, as announced in the 2016 Autumn Statement, is to be reduced to £4,000 from 6 April 2017.
Those to whom the MPAA applies may wish to consider accelerating pension contributions to before 6 April 2017 to make the best use of available allowances. Unlike the normal pensions annual allowance, the MPAA is lost if it is not used in full in the year in question.