Over three-quarters of us will not use the government's new Pension Wise free guidance service, says new research by pension advice company Portal Finance.
The service is being introduced to coincide with the new pension freeedom reforms in April.
You can currently get information about pensions at the Pension Wise website, but the face-to-face and telephone aspects are not yet operational.
A reminder of the reforms
From April, instead of having to buy an annuity with your pension pot, you can choose to take a lump sum of 25% from the pot tax free, or you might also choose to leave it in the hands of a fund manager in the hope that it will continue to grow.
You could even withdraw your whole pot at once, with 25% tax free and the rest being taxed. However, this may result in an excruciatingly large tax bill.
What it's called again?
With the new pension reforms due to be introduced in just two months, it seems that many people are still unaware of the name of Pension Wise, with 43% of the respondents saying that it was called The Pensions Advisory Service (TPAS).
TPAS is a separate, voluntary organisation, that will be involved in the delivery of Pension Wise when it becomes responsible for the telephone response to queries. But they are not one and the same.
Citizens Advice bureaux will be offering face-to-face contact to retirees. Gillian Guy, Chief Executive of the charity, explains that the purpose of Pension Wise is to help people understand the options available to them, but the new figures suggest that the message hasn’t come across quite as clearly as it could have.
The government needs to do more
“The government has not done enough to explain the presence or benefits of Pension Wise,” says Jamie Smith-Thompson, managing director at Portal Financial. “It could prove disastrous if people make decisions without being aware of the range of options available.”
Meanwhile, pensions provider Partnership is reporting that less than a third of 40- to 70-year-olds have spoken to anyone about the upcoming changes, and just 16% apiece had spoken to their pension provider or an independent financial adviser.
It says that this highlights a “worrying lack of engagement” and predicts that Pension Wise will just be swamped with requests for basic information in April.
These concerns about lack of take-up of the service now add to worries about the potential for scammers to take advantage of pensioners who free up a lump sum of money, and fears that pensioners could run out of money due to the reforms.
Advice versus guidance
There is a crucial distinction to make between ‘advice’ and ‘guidance’. Pension Wise is a guidance service. It can offer you information, but will not suggest a specific course of action or products for your circumstances.
Advice on what to actually do with your money can be sought through an independent financial adviser who is regulated by the Financial Conduct Authority. They can help you choose the best product for you, although you are of course free not to follow their advice.
Whilst they will charge you for their service, deciding what to do with your pension is such an important decision that it is likely that biting the bullet and paying the fee will be advantageous in the long run.