Opinion Former Article

Help with understanding pensions is welcome but more is needed

The Low Incomes Tax Reform Group (LITRG) welcomed measures announced today that seek to enable more pensions advice to be made available on a tax-free basis to savers, but points out that significantly more needs to be spent on education in this area.

LITRG notes that many people do not understand how pension schemes work, nor do they understand the most financially advantageous way to access their savings at retirement.

Anthony Thomas, Chairman of LITRG, said,

“Today the government announced some measures designed to improve the availability of financial advice to savers. These include enabling employers to pay up to £500 for an employee to be advised in relation to their pensions savings tax-free to the employee. They also include consulting on the introduction of a similar right for savers, under pensions age, to use up to £500 of their pensions savings, without tax charge, to pay for advice in relation to those savings.

“These provisions are helpful, but for many people the cost of the advice is likely to be significantly more than this. We are also concerned that the government intends to consult on providing a simple definition of financial advice for this purpose. While we are very much in favour of simplicity, we would be very concerned if this enabled people who are not properly qualified to provide advice.

“From last April, individuals can obtain some free guidance in relation to their pensions savings from Pension Wise, but guidance is not the same as advice. In a response[1] to a consultation late last year we suggested that a charity might be established to provide free financial advice to those with modest pension savings. Much more education is required in this area so that savers can understand any advice given and so make the best financial choices. Providing a dashboard showing all an individual’s pensions savings in one place will certainly help, but this is a very complex area. People can easily become overwhelmed with information that is not presented in a standard way.”

Notes for editors

1.       LITRG’s submission can be read in full here.


2.       Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

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