From next April millions of people will be able to get free, impartial guidance on how to make the most of their retirement savings.

The guidance, for those with defined contribution pensions, will be delivered by a range of independent organisations, including The Pensions Advisory Service (TPAS) and the Money Advice Service (MAS).

The Government says pension providers will have to tell savers about these services. (See's Pension Need-To-Knows guide for information on retirement saving.)

It's part of a radical shake-up of the pensions market, and comes after concerns consumers would not trust information given by organisations with a vested interest in selling a financial product or service.

Pensions shake-up

The reforms, which come into force in April, mean 300,000 individuals a year will be able to use their pension pots as they wish when they turn 55, subject to their marginal rate of tax (see the Radical pension reforms MSE News story).

The Government has also confirmed that it will continue to allow individuals to transfer from private sector defined benefit schemes to defined contribution pension schemes. But if you want to do this, you'll need to take advice from an impartial financial adviser first.

The Treasury says 18 million people will be able to take advantage of the changes to pensions.

Martin Lewis
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'Making sure people have the right support'

Osborne says: "It's right to support hard-working people that have taken the long-term decision to save for their future, and I'm pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive.

"We're making sure that people have the right support to make their own choice about how best to finance their retirement and I'm pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement."

Pensions expert Ros Altmann, the Government's new "older workers' business champion", says: "The decision that guidance must be impartial and separate from the industry is a real game-changer and will help equip people to make the right decisions for them.

"The challenge is now firmly with the industry to develop the products that people need, rather than simply the products they wish to sell."

What are defined benefit and defined contribution pensions?

There are two main types of workplace pension. Your employer decides which type of scheme you are offered.

  • Defined contribution: Your money is invested by a pension provider chosen by your employer. The amount you get when you retire usually depends on how much has been paid in, how long you've been paying in and how well the investment has done.

  • Defined benefit: These schemes promise to give you a certain amount each year when you retire. How much you get doesn't depend on investments.
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