Money and Pensions Service

3. Mrs M complains about the Money and Pensions Service (MaPS), specifically that she was not properly advised about the tax implications of withdrawing her full pension pot.

4. She says she contacted Pension Wise for guidance. The advice was delivered by Citizens Advice on behalf of MaPS. She says the adviser did not discuss how her being in paid employment could affect the amount of tax she would pay on the withdrawal.

5. Mrs M says she was told that 25 per cent of her pension would be tax-free and the remaining 75 per cent taxable, but was not advised that withdrawing the full amount while still in employment could push her into a higher tax bracket.

6. As a result, she received an unexpected tax bill of around £3,400 from HMRC. She says the situation has caused her stress and she has had to arrange to repay the tax bill in instalments.

7. Mrs M would like MaPS to compensate her for the £3,400 tax bill, as she says she would not have withdrawn the money had she been properly advised.

8. Mrs M contacted Pension Wise for guidance about withdrawing her pension. The appointment was delivered by Citizens Advice on behalf of MaPS.

9. During the appointment, the adviser discussed the tax treatment of pension withdrawals, including that 25 per cent would be tax-free and the remainder taxable. After receiving this advice, Mrs M decided to withdraw her full pension pot.

10. After the withdrawal, HMRC issued Mrs M a tax bill of around £3,400. Mrs M complained to MaPS that the adviser did not explain how withdrawing the full amount while still in employment could affect the tax she would pay by moving her into a higher tax band. She also said the call was not recorded despite her being told this is usually the case.

11. MaPS provided a final response maintaining that the guidance given was appropriate and that it sent a summary document covering the relevant tax information.

Pensions guidance

14. Before we decide if we should conduct a detailed investigation of a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and have not found any indications that something has gone wrong.

15. MaPS is a government-sponsored body responsible for providing free, impartial guidance to help people understand their financial options. As part of this role, MaPS oversees Pension Wise, a free and impartial pensions information service.

16. Mrs M told us that during her Pension Wise appointment the adviser explained that 25 per cent of her pension pot would be tax-free and the remaining 75 per cent taxable. However, she says the adviser did not specifically mention that withdrawing her full pension pot while she was in paid employment could result in her moving into a higher tax band.

17. To understand her concern clearly, we asked Mrs M if her concern was that the adviser did not tell her withdrawing the full amount could move her into a higher tax band, or if she was specifically told it would not. In her reply, Mrs M said “The advisor did not discuss how me being in paid employment would have anything to do with me withdrawing my pension.”

18. There is no call recording available, so we cannot determine exactly what was said during the appointment. We are an impartial organisation and we do not doubt what Mrs M has told us about her experience. Our role is to look at what should have happened and compare it with what did happen, based on the evidence available. In doing this, we also need to consider what type of service the MaPS, through Pension Wise, is expected to provide.

19. Under the Financial Guidance and Claims Act 2018, MaPS is established as a provider of impartial financial and pensions guidance, not regulated financial advice. Its role is to explain general principles and options, rather than to give personalised recommendations or predict the specific financial consequences of an individual’s decisions.

20. On its website, under ‘Advice and Guidance’, MaPS explains the difference between regulated financial advice and the guidance offered through services such as Pension Wise. Guidance is intended to give people clear, impartial information to help them understand their options, including the general tax implications of pension withdrawals.

21. It does not tell people what they should do, make recommendations, or give personalised financial or tax advice. Only firms authorised by the Financial Conduct Authority (FCA) can provide regulated financial advice, and they are legally responsible for the advice they give.

22. This is different to the guidance offered by the Money and Pensions Service. MaPS makes clear on its website that it is not liable for any decisions people make as a result of its guidance, because the service is not regulated financial advice and the decisions remain the responsibility of the individual. It says, “Providers of guidance are responsible for the accuracy and quality of the information they provide but not for any decision made based on it.”

23. Pension Wise guidance is intended to help people understand the overall implications of their options, but it cannot cover every individual circumstance or anticipate every possible outcome. The adviser explained that 25 per cent of the pension pot would be tax-free and that the remaining 75 per cent would be taxable. This is accurate. We can’t say that the omission of a discussion about Mrs M’s specific employment income, on its own, shows that the guidance fell below a reasonable standard.

24. MaPS told us that, on the day of the appointment, an automatically generated email was sent to Mrs M with several standard documents attached. One of these was Pension Wise – Getting Started, which MaPS describes as a summary of the options available for a defined contribution pension.

25. The document explains that it provides an overview of the choices someone has for a personal or workplace pension, and is intended to help them understand the implications of those options.

26. Section 5 of this document is titled “Take your whole pension in one go”. Under “Key facts”, it says: 27. If you take your whole pension in one go 25% is tax free and the remaining 75% is taxable.

28. The money from your pot will be added to any other income you have over the tax year.

29. Adding a large cash sum to your income could put you in a higher tax band.

30. The document also advises readers to think carefully before choosing this option, noting that once the money has been withdrawn the decision cannot be changed and the pot will no longer benefit from its previous tax-free status.

31. We asked Mrs M if she received this email, and she told us she did not. However, MaPS has provided evidence that the summary document was generated and sent automatically after her appointment, including the specific date and time it was issued.

32. We are an impartial organisation and consider the evidence from both parties equally. We do not doubt that Mrs M did not receive the email. We cannot say what happened to the email once it was sent, but based on the evidence we have seen, it was generated and issued in the way we would expect and forms part of a standard process applied to all Pension Wise sessions.

33. We cannot know exactly what was said during the telephone appointment, as the call recording is not available. We do not doubt what Mrs M has told us about her experience. However, the information published on the Money and Pensions Service website contains several references to income tax and the effect that pension withdrawals may have on a person’s overall tax position.

34. On its website guidance Taking your whole pension in one go (2023), it says:

“When you reach the age of 55, you may be able to take your entire pension pot as one lump sum if you want. Whether you can do this and how you might do it will depend on the type of pension you have. But if you do, you could end up with a big tax bill, and risk running out of money in retirement. It’s important to get advice before you commit.”

35. It goes on to say:

“When you take your entire pension pot as a lump sum – usually, the first 25% will be tax-free. The remaining 75% will be taxed as earnings.”

36. In addition, the standard documents MaPS says were sent after the appointment also set out these points clearly. While we cannot take a view about the specific wording used in the call, the evidence shows that the relevant tax information is provided consistently across MaPS’s offerings.

37. Mrs M has not said she was mis-advised, only that a specific point was not mentioned during the appointment. As we do not have a recording of the call, as an evidence-based organisation we cannot take a view on the exact guidance she was given. What we can say is that Mrs M was told 25 per cent of the withdrawal would be tax-free and the remaining 75 per cent taxable, which is the correct general explanation of how pension withdrawals are taxed. The rate applied will always depend on an individual’s circumstances.

38. While Mrs M did not take this to mean that the taxable amount would be treated as income for tax purposes, the information given did set out the basic tax implications of taking the whole pot. Ultimately, MaPS is clear that it is not responsible for financial decisions made as a result of the guidance it offers and encourages individuals to seek regulated financial advice. For this reason, we will not consider this element of Mrs M’s complaint further.

Call recording

39. Mrs M also complains that the organisation does not have a recording of her Pension Wise appointment. She says this is important because, in her view, the recording would demonstrate that she was not advised correctly.

40. Citizens Advice told MaPS that the call recording had been deleted in error due to a technical fault. As an impartial organisation, we have no reason to doubt this explanation. While having access to the recording would have been helpful, its absence does not, in itself, suggest something went wrong with the service provided.

41. In the interests of proportionality, we have not looked at MaPS or Citizens Advice’s data retention policies or considered whether either were required to retain the recording for a particular length of time. In this case, the availability of the recording would not change our overall assessment. MaPS is clear that Pension Wise provides guidance rather than regulated financial advice and is not liable for decisions people make as a result of that guidance.

42. Whether or not this specific point was discussed during the call, the written information we have seen throughout all of MaPS’s literature contains information about the tax implications of withdrawing a full pension pot.

43. We appreciate that this has been a difficult situation for Mrs M. The information involved, particularly around pensions and tax, can be hard for anyone to navigate. However, taking all of the available evidence into account, we have not seen any indication that the Money and Pensions Service has not acted in line with the legislation and guidance governing its work.

1. We have carefully considered Mrs M’s complaint about the Money and Pensions Service (MaPS). We strongly sympathise with her position in this case. Receiving an unexpected and significant tax bill is understandably both stressful and financially difficult.

2. Having reviewed the evidence, we have not seen any indication that MaPS has got anything wrong. We appreciate this is not the outcome Mrs M was hoping for and hope the following statement clearly explains how we have reached our decision.