The national press has been caught on the hop by chancellor George Osborne’s budget announcement about changes to the way we will be able to access our pensions.
Some commentators are hailing the change as a triumph for individuals, with others wondering whether some can be trusted with managing their own retirement finances rather than blowing it all on a Lamborghini (a state of affairs pensions minister Steve Webb admits he is “less bothered” about).
Either way the new regime, which sees the scrapping in 2015 of compulsory annuities for the 13 million people enrolled in defined contribution schemes, means most of us will have more control over how we spend our hard-earned pensions.
Pitiful annuity rates over recent years have forced many retired people into situations where they are receiving much less income than they’d been led to believe they would. Those people with relatively small amounts in their pension pot (the average is just £30,000) may understandably think they’d be better off paying off their mortgage, having the holiday of a lifetime or, yes, even buying that Lamborghini than settling for an income of a few hundred pounds a year.
What every soon-to-be-retiree could definitely use is good advice. The chancellor has promised that everyone retiring on a defined contribution pension will be offered free, impartial face to face advice, although details of how that will be delivered is still unclear.
In our view, giving people more control over their pension pot can only be a good thing – for too long now pensioners and savers have been short-changed by the system.
Coming soon: an exclusive sensibleinvesting.tv interview on this subject with pensions expert Dr Ros Altmann.