Millions of pension savers cannot benefit from a new tax break designed to help them take financial advice because major providers are not offering it to their customers.
The pension advice allowance, introduced in April, allows pension savers to take £500 tax-free from their retirement funds to help pay for the costs of financial advice.
The tax break was a response to a regulatory review that found that the high cost of advice was deterring savers with smaller pension pots, who were at risk of taking poor investment decisions.
But most leading pensions providers, with millions of customers, are not offering their customers access to the allowance and have not upgraded their systems to facilitate it.
Firms not offering the new pensions advice allowance include Aviva, Aegon, Fidelity, Legal & General, Prudential and Royal London.
Providers are not required to offer the new allowance, although some offer their customers access to HMRC’s “adviser charging” facility to pay for advice costs directly from their pension pots.
But this advice is typically linked to the purchase of the providers’ own products, and does not cover competitors’ products or wider retirement planning.
Prudential said it supported the principles of the new allowance, and had investigated making it available. “However, because there has been minimal demand from consumers, and the PAA is complicated to administer, we have decided not to introduce a facility to use the allowance at this time.”
Aviva said that it used the existing adviser charging system allowing customers to use their pension savings to pay for advice. However, it said that “some customers will need to transfer to another product” to access this.
Royal London also uses adviser charging. “We’ve received no requests to use the pension advice allowance since its introduction in April, but we continue to monitor demand,” the company said.
Aegon said while it welcomed the “principle” of a tax…