Strict tax rules around providing access to advice through employers needs to be redrawn, the FCA says.
As reported earlier by Money Marketing, as part of the final report of the Financial Advice Market Review, the regulator recommends the Government should ater the current £150 tax exemption to “provide employers with an easy way to support their employees in financial decision-making”.
Currently there is a £150 income tax and National Insurance exemption on advice arranged by an employer. The exemption means employees are not liable for the tax as a benefit in kind.
The FCA says as well as increasing the £150 exemption, providing advice could be made more attractive to employers by removing the cliff-edge that means the whole amount is taxable if firms pay over £150 for advice.
The regulator also says there is “broad misconception” from employers around the liabilities incurred by providing advice.
This includes the mistaken assumption they will be caught by the financial promotions regime.
The FCA is to work with The Pensions Regulator on a factsheet for employers and pension fund trustees clarifying how employers can support staff without crossing into regulated activities.
Old Mutual Wealth chief distribution officer Richard Freeman says: “Making it more cost-effective for employers to contribute to the cost of advice will encourage uptake.
“The workplace can be the best environment to get people thinking about the need to build a financial plan and improving the economic case for employers to contribute to the cost of advice is positive.”