The Federal Government is being urged to emulate the United Kingdom by introducing a “pension advice allowance”.
The Financial Planning Association (FPA) has used its pre-Budget submission to the Treasury to advocate for the pension advice allowance at the same time as continuing its long-term campaign to have the Government legislate to make financial advice tax deductible.
The FPA submission, filed in December, noted that the pension advice scheme had been legislated in the UK in April, last year, and claimed Australia now had “an opportunity to promote superannuation advice as a mechanism to decrease reliance on the age pension”.
“This becomes more paramount as the first wave of baby boomers, aged between 48 and 67 years, are nearing or reaching retirement age,” the submission said. “Furthermore, older generations will be more accustomed to traditional wealth advisors rather than cheaper alternatives like automation advice.”
It said the cost of advice was being heighted by the increasing regulatory cost burden such as the fees charged by the Australian Securities and Investments Commission (ASIC) and service models.
“Hence, customers require a larger sum to cover the costs,” the submission said.
Outlining the shape of the scheme, the FPA submission said it would allow a superannuation provider, in limited circumstances to withdraw funds from a client’s investment product to pay for financial advice on their behalf.
However, it said this would only be permitted at the express request of the client.
“The provider reduces the value of the client’s superannuation by the amount of the advice fee, and transfers these funds directly to that client’s adviser,” the submission said
The FPA submission envisages an allowance of $1,000 to be accessed no more than three times by people in their lifetimes and free of tax at the time of withdrawal from their superannuation accounts