Nearly half (49 per cent) of firms offering retirement advice have seen an increasing demand for their services as a result of recent changes in pension tax allowances, research from NextWealth, commissioned by Aegon, has found.

The increased demand was driven by a number of recent tax changes, including the abolition of the lifetime allowance (LTA) and the increase in the money purchase annual allowance, announced as part of the 2023 Spring Budget.

The research was carried out in late 2023 when HMRC had not yet published the final details of the way in which the LTA is being removed from legislation.

However, Aegon argued that while the Finance Act shared in late November offered some relief, as previous plans to tax beneficiaries who took death benefits as income were scrapped, advice around the LTA continues to be fraught with difficulty as the Labour Party initially said it would reinstate it if elected, with some exceptions for NHS staff.

Given this, Aegon warned that advisers face a major challenge in offering personalised recommendations to those clients affected by the change as the end of the tax year approaches.

Commenting on the findings, Aegon pensions director, Steven Cameron, said: “The abolition of the pensions LTA, with the details announced only very recently, 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.

“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.

“Some clients may also have read about the previously proposed changes to the tax treatment of death benefits, and advisers will be able to offer assurances that these were scrapped, albeit with some new complexities around allowances there too.

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

---