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What is the pensions advice allowance?

Learn all about the UK pensions advice allowance, whether you are eligible for it, and how to make the most of it.

Summary

  • The UK pensions advice allowance allows members of defined contribution funds to take money from their pension pots to seek financial advice.

  • Only certain individuals are eligible for this allowance, and it comes with several conditions.

  • Studies show that sound financial advice can substantially increase your pension pot.

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What is the pensions advice allowance?

The UK pensions advice allowance enables members of defined contribution funds to obtain tax-free pension advice using funds from their pension.

However, there are several conditions for using this allowance.

What are the benefits of pensions allowance advice?

With professional pension advice, you can make smarter decisions regarding your pension. 

Professional advisers can assist you in assessing:

  • The performance of your existing pension plan(s)

  • The pros and cons of consolidating multiple pension pots

  • Assessing the risk level of your pension plan(s)

  • Transferring a pension to a different pension provider

  • The pension withdrawal options available to you when you reach retirement age

How does the pensions advice allowance work?

The UK pensions advice allowance enables you to withdraw up to £500 from your pension pot up to three times (once in any given tax year) in your lifetime.

This means that you can access this advice at various stages in your life as your priorities inevitably change.

However, it is important to note that you may not be eligible for the pensions advice allowance. You are only eligible if:

  • You’re a member of a defined contribution fund (also known as a money purchase pension).

  • You have hybrid pension arrangements with cash balance or other money purchase benefits.

  • Your pension provider offers the pensions advice allowance.

This means that 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 obtained from an adviser who is authorised and regulated by the Financial Conduct Authority (FCA).

The application process for accessing the pensions advice allowance is different for each provider.

In all instances, it begins with contacting your provider and finding out how to proceed. 

How to make the most of pensions advice allowance

Since you can only access the pensions advice allowance three times in your lifetime, it is important to maximise the benefits of each consultation.

There are several ways in which to do this:

  • Seek advice early: Don’t wait until you retire.

  • Find out if your chosen fund and pension type are eligible for the pensions advice allowance.

  • Ensure that your chosen adviser is authorised to provide financial advice on pensions.

  • Make sure that your chosen adviser offers reasonable rates and fee structures in line with your needs.

  • Do research to ensure you ask all the right questions.

  • Seek advice during major life changes, such as marriage, divorce, unemployment, and starting a family.

Want to learn more about pensions?

Your pension will be your lifeline during retirement, so it is vital to seek professional advice about retirement planning.

Understanding the UK’s pensions advice allowance, whether you are eligible for it, and how best to use it are essential to making the most of this valuable benefit.

To learn more about retirement planning and get expert advice on pensions, let Unbiased match you with a financial adviser that suits your needs.

Get pension advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.