Employees across the UK are missing out a valuable tax perk that could see them get heavily discounted, independent financial advice about their pensions.
Launched in November 2017, pension advice vouchers are a government initiative that is backed by HM Revenue and Customs and are similar to childcare vouchers and the cycle to work scheme. However, they have largely been ignored by employers, with very few companies offering the benefit to their workforce.
With pension vouchers, staff are able to swap up to £500 of their pay every year for a pension advice voucher through a salary sacrifice scheme. This voucher can then be used to obtain financial advice about any sort of pension that the employee has, whether it be a workplace pension or personal pension.
Depending upon the employee’s wages, thanks to the tax and the national insurance saved, this advice can be significantly discounted. Basic rate taxpayers will find that their £500 voucher costs £340, higher rate taxpayers will pay £290 and for those earning £100,000 – £123,000, it will cost just £190. Those earning above this will pay £210.
Workers do not have to use a financial adviser chosen by their employer and are free to choose their own and the advice can be about broader issues such as the financial and tax issues related to pensions, enabling them to make informed decisions about their retirement.
However, according to Brian Henderson, speaking to the Sunday Times, very few, if any employers are taking up the vouchers. This may not be because of lack of interest in the scheme though he says:
“There’s an underlying challenge with employers offering an advisory service such as the vouchers and highlighting advisers to choose from, as they worry the advice could go wrong and they’re on the hook for it.”
It may be that the scheme is just in its early days, however, with some experts thinking that some employers will start offering the vouchers from April when many traditionally review their benefits arrangements.