What legislation allows for Pension Advice charges to qualify for Salary Sacrifice scheme?
On November 16th 2017 the Finance Act 2 was given Royal Assent, allowing employers to pay or reimburse the first £500 p.a. cost incurred by employees in receiving advice or information related to their pension arrangements.
There is more information here
Is this the same as the new Pension Advice Allowance?
No, it's entirely separate. That allowance allows people (employed or otherwise) to pay for £500 of advice from their pension funds, three times in a lifetime.
The two rules are often confused, as both relate to pension advice, both reference a sum of £500, and both were introduced in 2017.
Both allowances can be used by the same person in the same year.
Which employees are eligible for Pension Advice Vouchers?
Employees are eligible if they:
- Paid for pension advice since 6th April 2017
- Are employed and pay tax in UK
- Their employer has made this scheme available to them, or would be willing to
- Their pension advice fees were not paid from their pension fund
What qualifies as "pension advice"?
HMRC guidance states;
"The exemption applies to the provision of information or advice in connection with the person’s pension arrangements or the use of the person’s pension funds. It can include advice on general financial and tax issues relating to pensions arrangements or pension funds allowing individuals to make informed decisions about saving for their retirement."
So, "Holistic financial planning" would qualify. By definition, holistic planning would include pensions as an inextricable consideration, even if the recommendation was to take no action with any pension.
What if I've already deducted my fee from the client's pension fund?
These fees would not be eligible, as they have already avoided income tax. Of course, advisers should only be deducting fees from pension funds where the advice relates exclusively to that particular pension arrangement, rather than more generic tax and planning issues.
We recommend focusing use of this scheme on those charges which cannot be taken from a client's pension fund, that cover advice on general financial and tax issues related to pension saving or income. Holistic financial planning charges are a good example.
What if I have a client (or couple) with multiple employments?
Clients can claim up to £500 per employment. So for example, if you were advising a couple, who each held two jobs, they could claim up to £2000 p.a.
What about retired or self-employed clients?
This scheme is only available to employed individuals.
How is any VAT on advice fees treated?
Employers cannot reclaim any VAT paid. Employers will reimburse - and sacrifice salary - for the full amount paid (including VAT, where applicable).
Do I need to change how I charge, collect or administer fees?
No! Your client can claim a reimbursement for fees they've already paid you.
If you do wish to collect your fee directly via Pension Advice Vouchers, please contact us to discuss.
What work's involved for both me, and my clients?
Very little! As an adviser, just log into VouchedFor, and enter your clients' email addresses and confirm they've paid for advice. We'll then invite them to confirm they're happy to sacrifice salary and claim their reimbursement - which takes just a few seconds. We'll ask them to provide their HR contact details if we don't already have them, and invite their employer to get everything set up - which is again straightforward. At the end of the process we'll contact your client with details of how to cash in their reimbursement - again very simple.
What does the employer have to do?
The employer needs to approve an employee's request, once we've confirmed qualifying advice has been received from an appropriately authorised professional. The employer then pays our invoice, at which point we request payment instructions from your client. The employer will then arrange for a commensurate salary deduction via payroll.
Who is allowed to give "pension advice"?
The guidance above states "information" qualifies. "Information" (as distinct from "advice") is a non-regulated activity, and hence needn't be provided by a regulated financial adviser. However, Pension Advice Vouchers currently works with the same criteria as VouchedFor - and so the "advice" must come from an Independent Financial Adviser or Chartered Accountant. We are working on a solution that will very soon allow "restricted" financial advisers to use Pension Advice Vouchers.
What are your charges?
There is no charge for either advisers or their clients. We charge employers 13.8% of the reimbursement value, to cover the cost of running the scheme. This is in line with comparable schemes (e.g., Childcare Vouchers), and usually offset by the National Insurance employers save through salary sacrifice. In addition it is the most efficient way for the employer to be confident that qualifying advice has been received from an appropriately authorised professional.
Who's behind Pension Advice Vouchers?
Pension Advice Vouchers comes from VouchedFor.co.uk, the UK's leading reviews website for financial and legal professionals.
We’ve already helped over 100,000 people find a great financial adviser. Now we’re on a mission to help employers make it easy - and more affordable - for their employees to get brilliant financial advice.
Where will you direct employees who don't yet have an adviser?
Please see our Get Advice page for more info.