EIM21802 - Particular benefits: pension provision: pensions advice provided by an employer: exemption from charge

Pensions information and advice provided by an employer to employees generally (e.g. a presentation to which all employees are invited to attend) is unlikely to give rise to an employee benefit tax charge. However, where an employer pays fees to an external provider for one-to-one sessions to provide advice to employees, as a general principle a tax charge will arise on the cost of the advice as this represents an employment-related benefit.

Statutory Instrument 2002/205 as amended by S.I. 2004/3087

With effect from 6 April 2017 a new Income Tax exemption is available to cover the first £500 worth of relevant pensions advice provided to an employee. This page explains HMRC’s approach to pensions advice up to 5 April 2017. For tax years 2017/2018 onwards see EIM21803.

From 14 December 2004, Regulation 5 of S.I.2002/ 205 exempts from a benefits charge the cost of pensions advice and information provided specifically to an employee (e.g. in a one to one session), as long as

  • similar advice is offered to all employees, and
  • the nature of the advice does not extend beyond pensions into general financial, and particularly tax, advice and
  • the cost is no more than £150 per employee per year.

If the cost of the advice exceeds £150 per person the whole amount is taxable, not just the excess over £150.

Section 308B ITEPA

Regulations made under the Pension Schemes Act 2015 impose an obligation on employers running a defined benefit (“safeguarded benefits”) to defined contribution (“flexible benefits”) pension scheme transfer exercise to arrange or pay for appropriate independent advice for the pension scheme members concerned.

From 6 April 2015, where the employer provides or pays for advice for an employee in order to meet their obligations, the provision or payment is exempt from tax. If the employer provides or pays for more advice than they are obliged to, only the excess amount is taxable.

The exemption does not apply when the pension advice is funded by the employer as part of salary sacrifice arrangements.