Speaking on his BBC podcast, Martin explained that many people misunderstand how the popular 25% tax-free pension lump sum actually works. You might take 25% of your pension, but 75% of what you've sliced off is going to be taxed and 25% will be tax-free." Recommended readingMartin Lewis' free guidance recommendationRather than paying immediately for financial advice, Martin urged people to start with the Government-backed Pension Wise service. Pension Wise offers free, impartial guidance for people approaching retirement, explaining the different ways to access a pension and the tax implications of each option. Martin stressed that while advisers at Pension Wise won't recommend specific financial products, they can help people understand their choices before making what could be one of the biggest financial decisions of their lives.