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Pensions advice allowance: what you should know

Pensions advice allowance: what you should know
It can be difficult to decide what to do with your pension, whether you’re building it up or hoping to access it during retirement.
This article examines the pensions advice allowance, if you are eligible, and how to make the most of it.

What is the pensions advice allowance?

The pensions advice allowance allows those with defined contribution funds to get tax-free pension advice using money from their pension.
However, there are some conditions to be aware of before using this allowance.

Pensions allowance advice: what are the benefits?

With expert pension advice, you can make informed and confident decisions.
  • The performance of your pension plans
  • Whether it’s worth consolidating your pension pots
  • The risk level of your pension plans
  • Whether you should transfer a pension to a different provider
  • How to access your pensions when you reach retirement age

Pensions advice allowance: how does it work?

The pensions advice allowance allows you to withdraw a maximum of £500 from your pension up to three times (once in any given tax year) during your lifetime.
So, you can access pension advice at various stages in your life as your circumstances change.
However, not everyone is eligible for the pensions advice allowance.
You are eligible if you’re a member of a defined contribution fund, have hybrid pension arrangements with a cash balance or other money purchase benefits, and your pension provider offers the pensions advice allowance.
So, this means if you are a member of a defined benefit or final salary pension fund, you are not eligible for the pensions advice allowance. 
Pension allowance advice may only be received from an adviser authorised and regulated by the Financial Conduct Authority (FCA).
It’s worth stressing that the application process for accessing the pensions advice allowance is different for each provider, but it begins with first contacting your provider.

Making the most of the pensions advice allowance

As you can only access the pensions advice allowance three times, it is important to maximise the benefits of each consultation.
There are many ways to do this, including:
  • Seeking advice early as it’s not a good idea to wait until you retire - it may be too late to act at this point.
  • Finding out if your fund and pension type are eligible for the pensions advice allowance.
  • Making sure your adviser is authorised to provide financial advice on pensions.
  • Ensuring your adviser offers reasonable fees in line with your needs.
  • Doing your research to ensure you ask the right questions.
  • Seeking advice during major life changes, such as marriage and starting a family.
Your pension will be vital during retirement, so it’s a good idea to seek professional advice beforehand.
Understanding the pensions advice allowance, if you are eligible, and how to best use it is essential to making the most of this valuable benefit.
To learn more about retirement planning and receive expert advice on your pensions, let Unbiased match you with a financial adviser regulated by the FCA.
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