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Categories:Regulation

John McFall wants more tax breaks for advice

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Former Treasury select committee chairman Lord McFall is calling on the Government to provide greater subsidies to encourage more people to take financial advice.

Under current rules, pension advice worth £150 a year can be offered as a tax-free benefit to employees who sign up to a corporate scheme. However, if the cost exceeds £150, the whole amount will be taxed. McFall, who is chairing the workplace retirement income commission, wants the Government to provide a greater subsidy.

Speaking at the Money Marketing Investment Summit in Bedfordshire last week, McFall said: “It is a good idea for the taxpayer to subsidise advice to poorer people. The current legislation for advice on pensions allows people to get £150 worth of advice. I think there is room for that in the rest of the financial advice area.

“We have lost the savings culture in the UK. We need to bring that back and bring people into the financial community. The way that society is organised means that those who are financially excluded are socially excluded too.”

Evolve Financial Planning director Jason Witcombe says: “It is a good idea for taxpayers to subsidise advice. I think the way it would work is through the workplace, offered when employees go through life changing events like starting work, getting married and having children.

“Perhaps a tax break for employers who pay for financial advice or offer a scheme where employees can access advice on a subsidised basis would be useful. It is more valuable for employees to get decent advice than it is for employers to pay into a pension for them.”

Skerritt Consultants head of investments Andrew Merricks says: “It is a good idea but it will never happen. The taxpayer is not going to be able to afford to subsidise anything new for a long time.”

Aifa director of policy Andrew Strange said: “In this tough economic period we must do all we can to help people re-engage with their long term financial well-being. Access to independent financial advice is incredibly important in this process and we welcome the comments from Lord McFall.”

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Readers' comments (11)

  • The government could also help to limit the cost of the advice post RDR by unequivocally making Independent Financial Advice VAT free. This would help to keep access to IFAs for those on middling incomes.

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  • I was about to post that myself and saw John you had beaten me to it. Elegant, simple, cost neutral for the government - it eases admin for everyone and saves loads of hassle and uncertainty.

    So while I think it is a brilliant idea - for all the reasons above, it will probably never happen!

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  • It is a very stupid idea. One man's subsidy is another mans tax payemnt. All subsidies distort. Better to just slash taxes and state spending so people can afford to pay for advice and other services, thus allowing the price signal and other marker mechanisms to work.

    Don't forget that Mad McFall was part of the last junta that got us into this epic financial mess in the first place, in large part by these same type of policies.

    Bonkers. Utterly bonkers.

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  • Dear Mr McFall, it was your government that caused the problems!!!

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  • We have lost the savings culture in the UK. We need to bring that back and bring people into the financial community. The way that society is organised means that those who are financially excluded are socially excluded too"

    This is testament to the outcome thus far of well intentioned regulation concieved and delivered buy the FSA with systemic disregard to greater industry wisdom. There is worse to come and the effects will be felt long after Mr Saints will have had the opportunity to apologise. There are no surprises hear just a deep and sickening feeling of inevitability.

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  • How is it possible to give any meaningful pensions advice to the poor? If they can make any pension provision at all it may affect their benefits and we wouldn't want to do that now, would we???

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  • This man is a nutter !

    Having got that off my chest might I remind this twit that, until now, there has been a good measure of cross-subsidization between those people who make larger investments, take larger mortgages and pay for adequate protection help pay for the advice to those who need advice but cannot afford to pay for it. Most IFAs carry out a fair amount of pro bono work or give their time freely ('free advice) in the hope that they might earn a crust from commission payments - not any more thanks to RDR and being forced down the fee charging route. IFAs will need to count the cost of every client they see, not just the ones who can afford to pay.

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  • Unusual for me to disagree with Steve Farrell, but the the £150 annual tax free advice cost already exists. I have employer's with GPPs who don't currently pay a specific sum towards advice for their staff.
    Perhaps the way to do it is for the employer to give the staff member a choice. £150 towards the cost of advice (tax free) or an extra say £70 in to their pension or £50 bonud. If they want the £50, fine, their loss, but if they want pension and no advice as they think they know what they are doing, fine again, but if they want advice, then it's as good a way as any to pay for it, without taking money out of their pay packet.
    I haven't thought these figures through, just an example to shoot me down with....

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  • Why is the tax break only for corporate schemes? This discriminates against the smaller firm's employees, who arguably need the advice most.

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  • Another X-Schoolteacher that knows little and should grow up and come into the REAL WORLD!

    P S While he was on the TSC he did nothing apart from pontificate.

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