Fewer people are turning to professional advice when accessing their pension, even though the decisions are increasingly complex – and getting them wrong could prove costly.
The latest figures show advice has fallen to its lowest level in six years.
Here we outline the support available when making complex decisions about your pensions.
Fewer people are getting advice
The latest release of the FCA’s retirement income market data indicates that of the 962,000 pension plans accessed for the first time in 2024-25, only 31% were taken after receiving regulated advice.
Around 350,000 new pension drawdown plans were taken out in 2024-25, and only 45% of schemes were set up after receiving advice.
This compares to 66% of drawdown policies in 2018-19, and the proportion of customers taking advice has fallen for six years in a row.
Retirement decisions are among the most difficult financial challenges people will face. It’s worrying that of all pensions accessed, nearly six in 10 are taken without any professional advice or guidance at all.
- Find out more: what can I do with my pension pot?
Pensions have become more complex
This drop in advice comes as understanding and engagement with pensions remain stubbornly low.
The FCA’s 2024 Financial Lives survey found that 75% of over-45s don’t have a clear plan for how to take money from their pension – or didn’t realise they had to make a choice. For many, the cost of advice is off-putting, while others feel confident enough to go it alone or simply delay making a plan.
The downward trend in advice for drawdown is particularly worrying given its complexity. Customers must manage withdrawals, balance investment risk as markets move, and guard against running out of money if too much is withdrawn too soon or if they live longer than expected.
Then there is the tricky question of tax. All retirement income, whether from drawdown, annuity payments, money from defined benefit plans or fully cashed-in pensions, is subject to income tax.
The exception is the initial tax-free lump sum (also known as the ‘pension commencement lump sum’) of up to 25% of your pot. Total tax-free cash is capped at £268,275 for most people.
- Find out more: what is pension drawdown?
If you take out an annuity as a result of using the service from HUB Financial Solutions, Which? will earn a commission to help fund our not-for-profit mission.
How to find an adviser
If you’re not very experienced on financial matters, particularly if you do opt for a pension drawdown plan, turn to a regulated independent financial adviser. That way, you can ensure your money is invested appropriately for you and that your withdrawals are sustainable.
The cost of financial advice will be a barrier to some people. The FCA puts the average initial charge of advice at 2.4% of the amount invested, and you can expect ongoing fees of around 0.8%.
However, your pension might be the biggest pot of money you ever need to decide what to do with, and the consequences of making the wrong decision can be drastic and lasting.
It’s essential to shop around when seeking a financial adviser, as fees can vary significantly.
A comparison site is a good place to start your search. Unbiased is a free-to-use service that enables you to ‘browse for a trusted professional near you’. It can connect you with independent, FCA-regulated financial advisers tailored to your needs.
VouchedFor similarly has a directory of verified advisers, which it says are ‘all vetted, reviewed and monitored’, with feedback from real clients to help you compare and choose.
- Find out more: how to find a financial adviser
How to get free guidance
Fully regulated financial advice isn’t the only option – you can also access free guidance.
Pension Wise, from government-backed MoneyHelper, offers face-to-face appointments (held at Citizens Advice offices), or by telephone or online, to over-50s who have a defined contribution pension.
The session covers when you can access your pension pots, the different ways you can take money from your pension, how each option is usually taxed and how to spot scams.
Take-up of the service remains relatively low, although it is highly regarded by those who have used it. In 2024-25, just under 11% of pensions were accessed after a Pension Wise appointment – around 103,500 pots in total.
- Find out more: how to get pension advice and guidance for your retirement
What new pension advice options are coming?
The government and the FCA have acknowledged that more needs to be done to help savers.
To tackle the so-called ‘advice gap’, the FCA has proposed a new type of help called targeted support. This would allow firms to make suggestions to groups of consumers with similar characteristics – for example, those not saving enough for retirement.
Firms will be allowed to offer this support for free, but can charge for it if they wish. There is currently a consultation on targeted support, and the FCA is seeking to clarify proposed rules on charging and commission.
The regulator hopes that firms will be able to offer targeted support quickly; a launch date of March 2026 is scheduled.
There are also plans to introduce ‘simplified advice’. Unlike targeted support, this would be individualised advice but focused on a single, straightforward consumer need, without requiring a full assessment of your circumstances and delivered at a relatively low cost.
The FCA says it aims to finalise its new rules by the end of 2025.
- Find out more: new FCA targeted support: what it means for your finances