In efforts to make financial advice available to everyone, the government have introduced a new initiative, in the form of a £1500 allowance that can be drawn from your pension fund to cover costs relating to professional advice. These withdrawals are tax-free and can be taken in three instalments of £500.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Taking financial advice is proven to be beneficial for your retirement
Research shows that if you take professional, financial advice related to pension planning and overall retirement, you are inclined to save more, which ultimately results in a more enjoyable retirement.
These days, particularly young people, don’t have a focus on their retirement.
This could partly be due to the fact that saving for a first home is now such a battle, with many under 40 year olds not able to own their bricks and mortar. Any surplus income is therefore channeled into that.
Whatever your age, retirement planning is vital.
Particularly if the State pension allowance will not suit your lifestyle choices.
Research by Unbiased and supported by gov.uk, shows that pension holders with a fund above £100k are more likely to save an extra £100 more each month.
The result of this is a further £3,600 as annual income in retirement.
The study also showed that under 15% of people would be confident working towards financial goals for retirement without the help of a financial adviser, who has experience in areas like pension planning.
Only 22% of pension holders know the value of their pension fund when approaching retirement, meaning that largely most people enter retirement “blind” about their financial position, and with no working years to rectify their situation.
This is where regular, financial advice can make a difference to your future comfort and horizons.
The Pension Advice Allowance
It was mentioned in the Autumn Statement last year, as the government are committed to placing a real focus on retirement planning, particularly for younger people.
This new allowance, enables any pension holder with a defined contribution pension, to draw out £500 from the pension to pay for financial advice.
This allowance can be used a maximum of three times, through your working life, at the moment.
Some advisers are suggesting, the allowance could be used as follows:
- When considering a new pension, or starting to plan your retirement
- Mid-way to retirement, to ensure you are on track and to adjust your retirement plan accordingly
- When approaching retirement, to cover withdrawals and use of pension fund
Essentially though, the allowance can be used however you choose. The only stipulation is that there is only one withdrawal allowed per tax year.
The £500 withdrawal can be used to build a relationship with a financial adviser through face-to-face meetings, or robo-advice options are available too.
It is a great incentive as people from all ages can now engage with retirement planning and take their future into their own hands by seeking professional advice.
Pensions are Tax-Efficient Savings
Pensions are in general a great way to save towards retirement as they are tax-efficient.
If you are nearing, or already pay higher rate tax, then you are able to reduce your tax, or a proportion of it, back to the basic rate, by making pension contributions.
Pension planning can mean a more enjoyable retirement
Dental & Medical Financial Services have been helping doctors and dentists with retirement planning for over 25 years. Call to discuss your options with Darren:
Tel: 01403 780 770
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