How does Pension Wise, a guidance service, operate? Six out of ten retirees who received a pension did not use it

The free government-backed service Pension Wise is not used by many pension savers

Could it be helpful to you, and how does it operate?

Over 50% of "pension dippers" may have lost out on important advice because they didn't bother to use the free Pension Wise service before accessing their retirement funds.

In the last four years, 59% of savers who had access to a defined contribution pension did not use the government-backed guidance service, according to the Financial Conduct Authority's Financial Lives survey.

For pension savers 50 years of age and older, Pension Wise provides free, unbiased, and independent advice to help them make financial decisions as they consider retirement options for when they stop working and what to do with their pension fund.

This could cover topics like how annuities operate, how to avoid scams, and the amount of your state pension. The service also includes pension withdrawal tax payments.

Since its launch in April 2015, Pension Wise has celebrated its tenth anniversary. It was put in place following the introduction of pension freedoms, which allowed people to access their retirement funds however they pleased and did not have to purchase an annuity.

Though website use has decreased from 20 percent to 18 percent, more people are speaking with a Pension Wise specialist over the phone (20 percent in 2024 compared to 13 percent in 2022), according to retirement firm Just Group.

The percentage who had a face-to-face conversation stayed at 5%.

Pension Wise is being used by more people overall; however, 59 percent of respondents said they had not used it or were unaware of it, which is lower than the 63 percent who said the same in 2022.

"The vast majority of people are still receiving pensions without any expert assistance more than ten years after the reforms," says Stephen Lowe, group communications director at Just Group.

Progress is still glacial even though the number of people using guidance is increasing. Without expert assistance, hundreds of thousands of defined contribution pensionsroughly a millionare anticipated to be accessed this year.

"Rave reviews" are given to Pension Wise, he continues. Money Helper, which operates Pension Wise, reports that about 90% of clients who have used the phone service are "satisfied" and would suggest it.

The term "Pension Wise".

Money Helper operates Pension Wise, a government-sponsored advisory service. For people 50 years of age or older with a defined contribution (DC) pension fund based in the UK, it provides free, unbiased advice. This might be a pension from work or from personal savings.

People who are able to take their pension early because of illness or who have inherited a pension pot may also benefit from it.

Appointments can be made by phone or online. Unlike phone appointments, which last roughly an hour, the former are self-guided and can be completed at your own pace. You can also schedule an in-person appointment, which can take up to an hour and is provided by Citizens Advice.

An expert in Pension Wise will go over the different ways you can take money out of your defined contribution pension or pensions, as well as what taxes you will have to pay and how to avoid scams.

According to the latest official data, Pension Wise scheduled 39,883 phone appointments and 1,525 in-person appointments during the third quarter of 2024 - 2025.

Pension Wise is available to whom?

Pension Wise is available to savers 50 years of age or older who have a DC pension, such as a self-invested personal pension (Sipp) or a workplace pension.

Generally speaking, you cannot have a Pension Wise appointment if you are under 50 or only have a defined benefit pension, like a final salary plan. Money Helper says it might still be useful, though.

You can talk to a pension specialist by calling Money Helper at 0800 011 3797 or by using the webchat, which is open Monday through Friday from 9 a.m. to 5 p.m. (helpline) and 9 a.m. to 5 p.m. (webchat). Bank holidays are observed as closed days.

Does it take the place of paid financial advice?

A fantastic resource for free pension advice about your options as you get closer to retirement is Pension Wise. This might be sufficient for some, but for others, it might be worthwhile to spend money on more individualized and thorough financial guidance.

"We think that most pension savers could benefit from an appointment, especially those who are vulnerable or do not have access to financial advice," says Lowe of Just Group.

"We shouldn't undervalue the frequency with which people struggle with the intricacy of pension decisions," he continues. More than ten years after the pension freedom and choice reforms and the introduction of guidance, it is scandalous that the take-up is so low that it begs the question of what issues are being saved for later.

Advice and/or guidance are "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," according to Sarah Pennells, a consumer finance specialist at Royal London, who spoke to the BFIA.

According to a Royal London study, nearly one in five (18%) of those who were eligible to withdraw funds from their pension had not sought any advice or guidance prior to doing so, whether from friends and family or a financial expert.

Financial advice, if you can afford it, can offer more individualized guidance on all aspects of your finances, including investment and inheritance tax planning. Unlike a one-time, one-hour Pension Wise appointment, a financial adviser can also keep an eye on your finances and offer you advice every year.

Read more about how to do a mid-retirement MOT and how to manage your finances in retirement.