More than half of “pension dippers” didn’t bother using the free Pension Wise service before they accessed their retirement savings, meaning they may have missed out on valuable guidance.
This is according to the Financial Conduct Authority’s Financial Lives survey, which found that 59% of savers who accessed a defined contribution pension in the last four years didn’t use the government-backed guidance service.
Pension Wise offers free, independent and impartial guidance to pension savers aged 50 and over, to help them make financial decisions as they think about what to do with their pension pot and consider retirement options for when they stop working.
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This may include how annuities work, staying safe from scams, and how much state pension you’ll get. The service also covers paying tax on pension withdrawals.
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Pension Wise recently had its 10-year anniversary after launching in April 2015. It was set up after pension freedoms were introduced, which meant people could access their retirement savings as they liked and did not need to buy an annuity.
According to the retirement firm Just Group, more people are having a telephone conversation with a Pension Wise specialist (20% in 2024 versus 13% in 2022), but website use has declined from 20% to 18%.
The proportion having a face-to-face conversation remained static at 5%.
Overall, more people are using Pension Wise: while 59% said they had not used it or were not aware of it, this is down from 63% in 2022.
Stephen Lowe, group communications director at Just Group, comments: “More than a decade on from the reforms, a large majority of people are still accessing pensions without any professional support.
“While the numbers using guidance are rising, progress remains glacial. Around a million defined contribution pensions are likely to be accessed this year, hundreds of thousands without professional help.”
He adds that Pension Wise gets “rave reviews”. About 90% of customers who have used the telephone service are “satisfied” and would recommend it, says Money Helper, which runs Pension Wise.
What is Pension Wise?
Pension Wise is a government-backed guidance service run by Money Helper. It offers free, impartial guidance to those aged 50 or over who have a UK-based defined contribution (DC) pension pot. This could be a personal or workplace pension.
It can also help people who have inherited a pension pot or are able to take their pension early due to ill health.
Online or telephone appointments are available. The former are self-guided and can be done at your own pace, while phone appointments last about an hour. It’s also possible to book a face-to-face appointment; this is delivered by Citizens Advice and also lasts up to an hour.
A Pension Wise specialist will explain the various options of withdrawing money from your defined contribution pension(s), and can discuss what tax you’ll pay and how to look out for scams.
In the third quarter of 2024/25, Pension Wise arranged 1,525 face-to-face appointments, and 39,883 telephone appointments, according to the most recent official data.
Who can use Pension Wise?
Pension savers aged 50 or over that have a DC pension, such as a workplace pension or a self-invested personal pension (Sipp), can use Pension Wise.
If you’re under 50 or only have a defined benefit pension, such as a final salary plan, you usually won’t be able to have a Pension Wise appointment. However, Money Helper says it may still be able to help.
You can call Money Helper on 0800 011 3797 or use the webchat to speak to a pension specialist (opening times: Monday to Friday: 9am to 5pm (helpline) 9am to 5pm (webchat). Closed on bank holidays).
Does it replace paid-for financial advice?
Pension Wise is a great way to get free pensions guidance about your options as you approach retirement. For some people, this may be enough, but for others, it may be worth paying for more personalised and detailed financial advice.
Lowe at Just Group comments: “Our view is that the majority of pension savers could benefit from having an appointment, especially those who are vulnerable or do not have access to financial advice.”
He adds: “We shouldn’t underestimate how often people struggle with the complexity of pension decisions. It is a scandal that, more than a decade on from the pension ‘freedom and choice’ reforms and introduction of guidance, take-up is so low that it raises concerns about what problems are being stored up for the future.”
Sarah Pennells, consumer finance specialist at Royal London, tells MoneyWeek that guidance and/or advice is “invaluable when making decisions about your pension, such as deciding whether to take money out of your pension, when to take it out, or how to do this”.
Research by Royal London shows that almost one in five (18%) of those eligible to take money out of their pension had not taken any advice or guidance at all, whether from a financial professional or family and friends, before making a withdrawal.
If you can afford it, financial advice can give more personalised advice about all your finances, such as inheritance tax planning and investment advice. A financial adviser can also monitor your finances and give you advice each year, in contrast to a one-off one-hour Pension Wise appointment.
Read more: Managing your money in retirement and How to do a mid-retirement MOT.
