Tax Exemption Will Be Introduced For DB To DC Transfer Advice
The government announced that transfers from Defined Benefits (DB) to Defined Contribution (DC) schemes will be allowed, but for transfers over £30,000 these will only be allowed when regulated advice has been sought. Now a tax exemption will be applied.
As part of George Osborne’s 2015 Budget, the government is introducing an income tax exemption on fees for regulated financial advice on whether or not to transfer funds from DB to DC schemes.
No saver will be able to transfer from a DB to DC fund without proving that advice has been sought, except in cases where the transfer value is below £30,000.
Any employer which either provides this advice itself or pays for it for an employee will be exempt from a tax charge even though such a payment would normally attract a tax charge since the provision of financial advice is normally taxed as an employee benefit.
As Barnett Waddingham’s Head of Corporate Consulting Nick Griggs explained to Employee Benefits Magazine, “The provision of advice is usually taxed as a benefit to the employee. This will be a welcome easement for employers which are considering such exercises as a way of allowing DB members to access the new flexibilities, while also managing their pension liabilities, and for employees who wish to take their pension flexibly.”
All in all, this means that more employers are likely to pay for the regulated financial advice their employees need in order to transfer from a DB scheme to a DC scheme.
Photo credit goes to 401 (K) 2013