Pension Advice....a new Salary Sacrifice benefit

UPDATE: since first publishing this blog Pension Advice Vouchers have launched, making it easy to implement this salary sacrifice benefit. Wherever an employer offers Pension Advice Vouchers, employees can save tax on their Hatch fees.


A new tax exemption is soon to be ratified by the House of Lords, applying from April 2017, 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 means employees could pay as little as £190 for £500 worth of advice. Employers can also save on their National Insurance national insurance contributions.
 
The advice must be provided in connection with the employee’s pension arrangements or the use of their pension funds.  However, 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  (This is a wider definition to that which applied to the previous £150 exemption, now withdrawn).

Employers can either pay an adviser's fees directly, or reimburse an employee for fees already paid. This is a non-taxable benefit. The employer can then arrange a salary deduction to cover the cost.
 
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 only 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.
 
Note: The new exemption, which was included in the 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 here

UPDATE: since first publishing this blog Pension Advice Vouchers have launched, making it easy to implement this salary sacrifice benefit. Wherever an employer offers Pension Advice Vouchers, employees can save tax on their Hatch fees.