Fair care news

Pension Advice through Salary Sacrifice

UPDATE: 02/05/17 due to the snap election, the Pensions Advice clause has been removed from a now simplified Finance Bill. The expectation is that legislation will be reinstated early in the new government, following 8th June 2017.

A new tax exemption will come into play which allows employees to save Tax and National Insurance on the first £500 worth of pensions-related Financial Advice, each tax year, when offered through a salary sacrifice scheme. (This is separate to the new Pensions Advice Allowance, which allows individuals to dip in to their pension fund to pay for advice.)

This means that a typical higher-rate taxpayer will end up paying only £290 for £500 worth of advice, and will further benefit from the cost being spread over 12 months.

The advice must be provided in connection with the employee’s pension arrangements or the use of their pension funds.  It can include advice on general financial and tax issues relating to pension arrangements or pension funds, allowing employees to make informed decisions about saving for retirement.  (This is a wider definition to that which applied to the previous £150 exemption, now withdrawn.)

As with certain other government-endorsed salary sacrifice schemes, for the exemption to apply, the scheme has to be offered by an employer to all employees generally.  There are provisions, however, for the scheme to be restricted by location, or by reference to relevant pensionable age, or if employees meet an ill health condition.

The exemption applies to the first £500 of employer-arranged pension advice in a tax year.  Employees will be expected to meet any cost in excess of this directly with the adviser.

The new exemption, which is included in Finance Bill 2017, was detailed in an HMRC Policy paper dated 5th December 2016, and followed up with Guidance published on 20th March 2017.  The Guidance can be found at:

https://www.gov.uk/government/publications/pensions-advice/pensions-advice

Fair Care has created a new Financial Advice salary sacrifice module, which is available to all its flexible benefit clients, as well as available to the Financial Advisory community to promote their advice services.

For more information on salary sacrifice and schemes and flexible benefits for employees, please contact Fair Care on 0800 652 4745.