LITRG Press release: A new service to close pension freedoms advice gap essential, says LITRG

The Low Incomes Tax Reform Group (LITRG) is calling on the new Money and Pensions Service (MAPS) to urgently consider setting up a free pension freedoms advisory service to help those on low incomes.

In response to MAPS’ ‘listening document,’ LITRG recommends that MAPS should play a central role in funding and delivering a pension freedoms advice service. This is because the existing written guidance model offered through Pension Wise is inadequate, says LITRG.

LITRG said its recommendation will help to tackle the problem of people withdrawing their entire pension pots and putting the money in the bank instead – triggering potentially avoidable tax charges and benefit withdrawal issues. For those with only small pension pots, for whom every penny counts, such mistakes can increase their risk of slipping into poverty in older age.

Victoria Todd, Head of LITRG team, said:

“Pension Wise was set up to provide guidance around the various options available for those seeking to make use of their pension pots. But guidance is not the same as advice and there are many people out there who are unable to afford to pay an independent financial adviser (IFA) or who have smaller pension pots that make finding an IFA difficult.

“People on low incomes do not necessarily have hugely complex financial affairs, but often they can struggle to understand and knit guidance together, so need a more managed, tailored approach, based on their individual needs and circumstances.

“When it comes to tax, not only do people need to understand the tax impact of different pensions choices and how they might be mitigated but they also need to understand when and how any tax due will be collected. Even if there are no direct tax consequences, for example because their total taxable income remains below the personal allowance, a withdrawal could nevertheless have a deleterious effect on benefits if the income or capital goes above a threshold where benefits become restricted or simply unavailable.

“MAPS’ vision is ‘everyone making the most of their money and pensions’ – we wholeheartedly agree with this vision and fixing the advice gap would be a good starting point to achieving it. In conjunction, an automatic default into an advice appointment, would provide an extra layer of protection for the most vulnerable.”

Until then, LITRG recommends that those who are about to take their pension, and who cannot afford professional advice, should carry out additional research on top of any information they may have received from Pension Wise. LITRG’s website has excellent guidance and people may be able to get practical support with tax issues around pension freedoms from the charity Tax Help for Older People.

  1. Under pension freedoms (sometimes also called pension flexibility), introduced from April 2015, individuals are essentially able to do whatever they like with their defined contribution or money purchase pension funds from age 55 – for example buy an annuity, take the whole fund in one go or keep it invested and drawdown some money each year.
  2. LITRG’s submission to Money and Pensions Service (MAPS)
  3. LITRG’s website guidance on pension freedoms


Contact: Mereditch McCammond (please use form at Contact Us) or follow us on Twitter: @LITRGNews

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