Employer paid pension advice: the £500 exemption

Q: How is this different from other pensions advice reliefs?

Two other rules are often confused with section 308C. Section 308B exempts independent advice an employer is required to arrange or pay for under regulations made under the Pension Schemes Act 2015, typically when it runs an exercise to convert or transfer safeguarded (defined benefit) rights to flexible benefits. There is no £500 cap, but only the amount the employer is required to provide is exempt, and the exemption does not apply under salary sacrifice. The pension advice allowance is paid by the pension scheme, not the employer. Since 6 April 2017 a registered scheme may pay up to £500 from a money purchase or hybrid arrangement directly to a financial adviser at the member's request, no more than once in a tax year and no more than three times in total across all schemes. PTM142000 confirms the member is not taxed on it. Because it comes out of the member's own pot, it reduces the fund, whereas the employer exemption costs the employee nothing.

An employer can provide, pay for or reimburse up to £500 of pensions advice for each employee in a tax year without any income tax or National Insurance charge. The exemption is in section 308C of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and has applied since 6 April 2017. The advice must relate to the person’s pension arrangements or the use of their pension funds, and it must be offered under a scheme open to employees generally, or to all those near pension age or in ill health.

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What does section 308C exempt?

Section 308C(1) removes any income tax charge on either of two things:

the provision of relevant pensions advice to an employee, a former employee or a prospective employee; or
the payment or reimbursement of costs incurred by or for such a person in obtaining relevant pensions advice.

So the exemption works whether the employer contracts with an adviser and pays the invoice, or the employee finds their own adviser and claims the fee back. Former employees are included, which helps where advice is arranged as part of a retirement or exit, and prospective employees are included where advice is offered before someone starts.

HMRC’s Employment Income Manual at EIM21803 confirms that the advice is not restricted to the employer’s own pension scheme. It can cover all of the employee’s pension arrangements, including old workplace pots and personal pensions.

What counts as relevant pensions advice?

Section 308C(5) defines it as information or advice in connection with the person’s pension arrangements or the use of the person’s pension funds. HMRC guidance (both EIM21803 and employer guide 480) says this can include information or advice on general financial and tax issues relating to the employee’s pension arrangements or pension funds, so that people can make informed decisions about saving for retirement.

The link to pensions is the boundary. Advice on how to draw a pension, whether to consolidate pots, how pension income will be taxed or how much to contribute is within the definition. Advice that is not connected with pension arrangements or pension funds, such as general investment planning outside pensions or mortgage advice, is outside it and is a taxable benefit in the usual way. Where an adviser covers both in one engagement, it is sensible to have the fee split on the invoice.

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How does the £500 limit work?

Section 308C(2) caps the exemption at £500 per person per tax year. Only the excess is taxable: EIM21803 says that where the cost is more than £500, the first £500 is tax free and the amount over £500 is subject to income tax and National Insurance in the normal way.

The limit applies to each employment separately. Section 308C(4) says that where an individual has more than one employer or former employer in a tax year, the exemption applies separately to each one.

This replaced a less generous rule. From 14 December 2004 to 5 April 2017, regulation 5 of SI 2002/205 exempted pensions advice only up to £150 per employee per year, it could not extend into general financial or tax advice, and if the cost exceeded £150 the whole amount was taxable (EIM21802).

Who must the scheme be open to?

The advice must be provided under a scheme meeting one of two conditions. EIM21803 explains that “scheme” here just means the employer’s arrangements for giving employees access to the advice.

Condition A: the scheme is open to the employer’s employees generally, or generally to its employees at a particular location.
Condition B: the scheme is open generally to employees (or employees at a location) who have reached the minimum qualifying age or who meet the ill health condition.

The minimum qualifying age is the employee’s relevant pension age less 5 years. Relevant pension age is usually the normal minimum pension age, or a lower protected pension age where one applies. The normal minimum pension age has been 55 since 6 April 2010, giving a minimum qualifying age of 50, and the Pensions Tax Manual at PTM062100 confirms it rises to 57 from 6 April 2028. The ill health condition is met if the employer is satisfied, on evidence from a registered medical practitioner, that the employee is and will continue to be incapable of carrying on their occupation because of physical or mental impairment, which often goes hand in hand with ill health early retirement.

What fails is advice offered only to selected individuals, such as directors, without a wider group being eligible.

Can pensions advice be provided through salary sacrifice?

Yes. Since 6 April 2017 most benefits provided through optional remuneration arrangements lose their exemption, but section 308C is one of the excluded exemptions listed at EIM44131. Advice provided in return for salary given up therefore remains exempt, up to £500, as long as the other conditions are met. The wider rules are in salary sacrifice explained.

How is this different from other pensions advice reliefs?

Two other rules are often confused with section 308C.

Section 308B exempts independent advice an employer is required to arrange or pay for under regulations made under the Pension Schemes Act 2015, typically when it runs an exercise to convert or transfer safeguarded (defined benefit) rights to flexible benefits. There is no £500 cap, but only the amount the employer is required to provide is exempt, and the exemption does not apply under salary sacrifice.

The pension advice allowance is paid by the pension scheme, not the employer. Since 6 April 2017 a registered scheme may pay up to £500 from a money purchase or hybrid arrangement directly to a financial adviser at the member’s request, no more than once in a tax year and no more than three times in total across all schemes. PTM142000 confirms the member is not taxed on it. Because it comes out of the member’s own pot, it reduces the fund, whereas the employer exemption costs the employee nothing.

What about National Insurance and reporting?

A cash payment or reimbursement within the exemption is disregarded for Class 1 National Insurance by paragraph 13 of Part 6 of Schedule 3 to the Social Security (Contributions) Regulations 2001, which mirrors the same £500 cap and the same Conditions A and B. Where the employer contracts for the advice directly, the exempt part is not charged to tax and so carries no Class 1A. The excess over £500 is taxable and reported in the normal way; see benefits in kind and form P11D.

How does this work in practice?

Illustration only. A manufacturer offers every employee aged 50 or over a session with an independent adviser, paying the adviser directly. Most sessions cost £400, which is fully exempt. One employee also asks the adviser to plan the drawdown of three old pots and the fee comes to £750 in the tax year. The first £500 is exempt; £250 is a taxable benefit. If the same employee also receives £300 of pensions advice from a second, part time employer that year, that is covered by a separate £500 limit.

What mistakes come up most often?

Offering advice only to directors or senior managers, which meets neither condition.
Treating the whole fee as taxable when it exceeds £500, which was the pre 2017 rule.
Paying for wider financial planning that has no connection with pensions and treating it as exempt.
Assuming the scheme’s pension advice allowance is the same as the employer exemption.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.