UK - The government's tax exemptions for companies that pay for employees to receive independent financial advice have been dismissed as a "sham".
The tax exemption – the regulations for which have just been laid – is designed to encourage firms to boost their workers’ pensions awareness and scheme take-up levels.
It applies to fees for one-to-one sessions on financial advice to employees or external seminars. However, if the cost to the employer exceeds £150 per person, the whole amount will be subject to tax. Additionally, advice on non-pension investments will not be covered.
Hewitt Associates consultant Kevin Wesbroom dismissed the move as a “sham”.
He said: “By the time they’ve gone through all the money laundering procedures, know your customer, etc, they’ve spent £150 and they haven’t even started. The cost of compliance is well over £150 on its own.
“This is hardly going to transform the world of personal financial advice. It is annoying the government has not thought this through, otherwise we could have had some really attractive stuff from employers.”
Mercer Human Resource Consulting European partner Matthew Demwell said that while it was encouraging that the government wanted to help employers provide financial advice to employees, the £150 limit had to be raised.
He said: “The limit is insufficient to pay for any meaningful personal advice. There is no incentive for employers to provide more than the minimum, as they will be taxed on the entire amount if the advice fees exceed £150.
“The advice needs to cover all the financial options open to employees, so they have the full picture.”
Hargreaves Lansdown head of pensions research Tom McPhail agreed and said that financial advice would be of limited use on its own, and that it must be coupled with suitable member communication packages.
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