Is a pension adviser worth paying for?

Are pension advisors worth it? Paid advice gives a personal recommendation that free guidance does not, for a fee; whether that pays off depends on your case.

No page can say whether a fee will repay itself for you, and this one does not try. It sets out what regulated advice adds to the free service, the main case where the law requires it, the protections that come with it and what published research has measured. Free, impartial guidance from Pension Wise costs nothing and can come first. Would a conversation suit you better than reading? Whoever answers the form on this page is an adviser at an FCA-authorised firm, and requesting the call is free.

What does paid advice give you that free guidance does not?

The FCA draws the line in its guidance on what counts as regulated advice. In its view, "advice requires an element of opinion on the part of the adviser. In effect, it is a recommendation as to a course of action." Information, by contrast, "involves statements of fact or figures". Giving facts with no comment on how they bear on your decision is not advice, and advice includes anything that goes beyond information and is objectively likely to influence the choice you make.

Pension Wise sits on the information side of that line. A free appointment walks through the ways to take a defined contribution pot and how each is usually taxed; it is impartial, government-backed and open whatever the pot is worth. What it leaves with you is the choice itself: you come away with an overview, and acting on it is up to you.

Paid advice picks up where that stops. MoneyHelper's guide to retirement advisers says a regulated adviser gathers information from you and can "tell you what's best for you and your money, including when and how to access your pension". It expects a good one to offer a tailored plan and recommend suitable products and services, followed by a written report giving the recommendation, the reasons it suits you and what it costs. Put simply, guidance lays out the options, while advice picks one for you and explains why. The regulatory detail is in what counts as pension advice; every no-cost source of help is gathered in our free pension help guide.

When is advice required by law?

Usually it is not. MoneyHelper's guide notes that advice first is mandatory for some financial products, but optional for most things, and that it can be costly. The ways of taking a pot are laid out in your options at retirement.

The clearest legal requirement applies to giving up a defined benefit (final salary) pension. The FCA puts it plainly: "If the value of your DB scheme is more than £30,000 you must, by law, get advice from a regulated financial adviser." Only full advice counts here. A shorter, abridged form can establish that a transfer would not suit you, but it cannot produce the confirmation that transfer advice was taken, and in most cases full advice costs the same whether you transfer or not. That matters when judging what the fee buys: you are paying for the recommendation, not for the transfer.

The legal test is regulation 5 of SI 2015/742, in the form substituted from 6 April 2018. Trustees need not check that a member has taken appropriate independent advice if, on the valuation date, the transfer value of that member's safeguarded rights is no more than £30,000; the value is calculated without the reductions to initial cash equivalents that the transfer value rules otherwise allow. Being required to take advice is no push towards transferring: the FCA and The Pensions Regulator both hold that keeping a defined benefit pension is in most people's best interests. Who the test covers is set out in the transfer advice requirement, with the process in transferring a pension step by step.

What protections come with regulated advice?

Paying a regulated firm opens two routes if the advice proves unsuitable, and neither charges you to use it.

• The Financial Ombudsman Service, for complaints. A complaint goes to the firm first. If that fails, the ombudsman can look at cases where you were "advised to make an investment that wasn't right for you", as long as the business is regulated by the FCA. Where it decides the firm acted unfairly, it tells the firm to restore you to where you would be had the mistake not been made.
• The Financial Services Compensation Scheme, if the firm has failed. This route opens only once the adviser or provider is out of business, not while it is trading. For a firm that failed after 1 Apr 2019, the FSCS investments page gives "up to £85,000 per eligible person, per firm", with lower limits for earlier failures. Cover depends on the FCA or PRA having authorised the firm and on the service and product being regulated; giving advice is one such regulated activity.

Neither route covers a market fall. Disappointing performance is not grounds for a complaint unless, for example, you were told an investment was low risk and it turned out to be high risk (MoneyHelper's example), and compensation claims for poor investment performance are not accepted, since an investment's value can drop as well as grow. Whether a firm is authorised, and so inside both routes, shows on the FCA register; finding a regulated adviser explains the check, and are pensions protected? looks at protection more widely.

What does the published evidence say about outcomes?

Direct evidence is thin. MoneyHelper's guide states, citing the International Longevity Centre (ILC-UK), that people who receive advice "typically build more wealth than those who don't over the long term". The study behind that, ILC-UK's What it's worth: revisiting the value of financial advice, was published in November 2019 and describes itself as produced with the support of Royal London. Working from the government's Wealth and Assets Survey, it found that receiving professional advice between 2001 and 2006 resulted in a boost to wealth in pensions and financial assets of £47,706 in 2014/16: an extra £31,000 of pension wealth and over £16,000 of non-pension financial wealth.

Read it with its limits. The advice was taken between 2001 and 2006, before the pension freedoms, and the outcomes were measured in 2014/16. It is not a trial. The authors matched advised and unadvised survey respondents on their characteristics (propensity score matching) because, in their words, "those who take advice are different than those who do not". Of their further finding on ongoing advice, they say it does not take self-selection into account, "as with the outcomes comparing the advised and non-advised". Its figures describe groups of respondents, not what advice would do for any one pot.

What is there to weigh before paying?

Nothing here points either way. The questions people tend to weigh are these.

• How much of the decision is yours to settle with free guidance, and how much turns on tax, health, a partner or several pots at once.
• What a written quote covers for the whole job, since charges vary from firm to firm and comparing more than one quote is sensible. Pension advice cost covers how fees are built.
• Whether the money at stake is large enough, or the choice hard enough to reverse, to justify a fee, bearing in mind that investments can lose value however sound the advice.
• Whether the firm is authorised, because the protections above depend on it.

Questions people ask about pension advisers

Are pension advisers free?

No. The FCA is clear that professional pension advice is never free, which is why a cold offer of a no-cost review of your pension is a warning sign (see pension scams). A first meeting may cost nothing, and the price of the advice itself has to be disclosed before you commit.

How do I find and check a pension adviser?

Directories and the FCA register are the usual routes, and for a defined benefit transfer the firm's register entry should show the pension transfer permission; how to find a pension adviser walks through both.

Is a pension adviser worth it for a small pot?

Guidance is open whatever you hold, as Pension Wise sets no minimum pot size. Whether a fee makes sense on a small pot comes down to setting the written quote against what is at stake; the ILC figures above describe survey groups, not small pots in particular.

Your next step

Curious what advice could cover in your own case? Asking for a free call back takes the form on this page plus a minute or two, and an adviser at an FCA-authorised firm then rings you. Any fee is set out by that firm before you commit, and Pension Wise, MoneyHelper and your own scheme remain open to you whatever you decide.