The plan to allow people to withdraw £500 tax free from their defined contribution pension to redeem against the cost of financial advice was first announced in March as part of the Financial Advice Market Review (FAMR) and is currently under consultation.

However, a study of 1,000 people aged 50 plus by Retirement Advantage found 62% would not use the allowance, even though 38% were put off using a financial adviser because of cost.

Andrew Tully, pensions technical director at Retirement Advantage, said: “While it sounds like a good idea to let people use their pension savings to pay for advice, it appears not only are people unlikely to take up the offer, but £500 won’t actually go that far.

“Cost is clearly still a big issue when you ask people what the barriers are to seeking advice, alongside trust.

“On a positive note it is good to see government supporting advice and recognising the real value in people getting help and advice at retirement. The trick will now be to create a market which can service a wider range of consumers cost-effectively and also evidence the value of the advice being provided.”

The research also found the most common sources for financial advice among the over 50s are the internet (43%), financial advisers (43%) and the Government’s Pension Wise service (38%).

Tully added: “The internet is clearly a force to be reckoned with as consumers self-direct or simply use it to check facts and figures. What we’ve found from speaking to consumers is that many are using a combination of web research and professional advice.”