Half of firms (49%) offering retirement advice are seeing an increase in demand for their services because of changes in pensions tax allowances, new research from NextWealth commissioned by Aegon UK has indicated.

These changes include the abolition of the lifetime allowance and the increase in the money purchase annual allowance.

NextWealth’s research, based on a study with 200 financial advisers, was carried out in late 2023 when HMRC had not yet published the final details of the way in which the lifetime allowance is being removed from legislation.

Advisers were left in limbo until the Finance Act was published on 27 November, which offered some relief as previous plans to tax beneficiaries who took death benefits as income were scrapped. However, advice around the lifetime allowance continues to be fraught with difficulty as the Labour Party initially said it would reinstate it if elected, with some exceptions for NHS staff.

Pensions director at Aegon, Steven Cameron, suggested the abolition of the lifetime allowance will “pile pressure on advisers” as the tax year end approaches.

“Some clients will want to discuss if the removal of the allowance means it makes sense to pay further contributions into their pension this tax year,” Cameron said. “This could prove very tax efficient although they need to understand that if already over the previous lifetime allowance, they’re unlikely to accrue any additional tax-free lump sum entitlement.

“Others may want advice on the pros and cons of crystallising their pots now, particularly if already above the lifetime allowance and without any protections. While there is no immediate need to do so, particularly before the end of the tax year, some may have concerns that an incoming Labour Government could reinstate the allowance, meaning they have a limited timeslot for crystallising without facing a lifetime allowance charge.

“With many different implications depending on personal circumstances, advisers face an even busier time than usual as the tax year end approaches.”

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