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The introduction of a £500 pension advice allowance (PAA) is unlikely to be immediately popular as most savers either don’t know it exists, or have little idea of what they should expect for their money. Employers have a key role to play in driving education and ensuring that their employees seek optimal retirement outcomes.
Employers can assist in the procurement of financial advice on pensions by managing the cost for the employee. However, while there are various ways in which employers can help, they must be prepared and willing to assist to make advice practical for their employees.
Under the new PAA rules, an employer can pay for an employee’s financial advice up to a ceiling of £500 without incurring a ‘benefit in kind’ charge. An efficient method more likely to deliver the basic information that most savers need is group pension meetings, where a practical introduction to the company pension scheme provides a valuable introduction. As a group benefit, there is no ‘benefit in kind’ charge to apportion, and individuals with more specific advice requirements can seek further help as and when it is needed.
Most employees understand how they can obtain the funds to buy a house, car or mobile phone. We need to embed the same understanding on obtaining the funds to provide an income in retirement. Employer driven pensions education is important at all stages of the retirement savings journey, and employees who are encouraged to plan early can expect meaningfully better retirement incomes.