Just 1% of pensioners use free government advice in some regions

The maximum take-up is just 3.1%, according to a startling FOI request.

Savers in their 50s are being encouraged to get free guidance from Pension Wise, as figures reveal as few as 1% of those eligible use the service.

Anyone aged over 50 is entitled to a free appointment with the government-backed Pension Wise to discuss their retirement options. This will help them decide how best to manage taking an income from their pension pot.

But a Freedom of Information (FOI) request to the Money and Pension Service, which includes Pension Wise, found huge disparity in take-up. There are double the number of appointments to pension savers in some regions of the UK than others.

Greater London and Northern Ireland have the lowest take-up. Just 1.2% of eligible pension savers have made use of the service. 

In Scotland, 3.1% of pension savers have used Pension Wise, the highest in the UK, followed by the West Midlands (2.6%), and Yorkshire and Humberside (2.5%).

Financial firm Just Group submitted the FOI request.

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He said concerns about scams and poor advice led to rules being tightened in the defined benefit (DB) pension market. But he added that government and regulators needed to anticipate emerging problems in the DC market. 

Most people have DC pensions, and it is this type savers would find most help with from Pension Wise.

Lowe said: “We risk a two-tier system if we do not start to level up the DC safeguards towards the more stringent standards that exist for DB members.”

Pensions Minister Guy Opperman yesterday called on the Treasury to increase the Pensions Advice Allowance, so more of those saving for retirement can access financial planning advice.  

Employees can receive up to £500 tax-free every year to provide financial advice on workplace pensions and associated benefits.

Where an employer is unable to fund the allowance, employees can arrange a payment for advice via salary sacrifice. This saves tax and National Insurance on the sum sacrificed, cutting the cost of advice by between 32% and 47%.

This means £500 of advice will cost a basic rate taxpayer just £340 and a top rate taxpayer £265, according to calculations by advice firm LEBC.

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“Paying regular attention to retirement savings is more likely to result in a better retirement, and the £500 Annual Advice Allowance is a cost-effective way for employers to help their staff get the most out of workplace pensions,” said Kay Ingram of LEBC.

“None of us should be waiting until the last minute to make major life-changing decisions,” she added.

The maximum Pensions Advice Allowance, which can be taken in up to three payments over three separate tax years, is £1,500. The Pension Minister is asking the Treasury for an increase, as currently just a handful of pension providers offer the facility.  

Stephen Lowe, group communications director at Just Group, says: “We estimate that in the area of highest usage, fewer than one in 33 defined contribution (DC) pension savers eligible for a free guidance appointment take it up each year. In some areas, it is more like one in 100.”