The government has introduced an income tax exemption for financial advice provided as part of employer-led transfer exercises from defined benefit (DB) to defined contribution (DC) pension schemes.
This follows the Pension Schemes Act 2015, which set out new rules surrounding DB to DC transfer.
Under these rules members are required to obtain appropriate independent advice from a Financial Conduct Authority approved adviser before the scheme can action the transfer - a move intended to ensure that the implications of giving up a valuable benefit are fully understood.
And employers are obliged to pay for such financial advice when they have raised the option of transferring by running an official transfer exercise.
In normal circumstances, the provision of advice by employers would represent either a benefit in kind or payment of taxable earnings.
The exemption announced by the government yesterday - which will have effect on and after 6 April 2015 - will prevent employees from being subject to an additional tax charge or National Insurance contribution (NICs) liability as a result of receiving government mandated advice and will also protect employers from the NICs liability that would arise.
All advice provided by employers to employees or former employees under these circumstances will now be exempt from income tax for the employee and there will be no NIC liability for the employer or employee, dependent on how provision of the advice is paid.
But the government said the exemption will only apply when the employer bears the cost of providing the advice and does not pass this on to employees, for example through the use of salary sacrifice arrangements.
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