Government Allows People Access Their Own Money

[ludwig]

It's pretty radical stuff. What's the consensus here on AB - good or bad?

http://www.bbc.com/news/uk-politics-26649162

[Bazile]

Trouble is a lot of people will blow the cash through lack of foresight or bad financial planning or bad financial advice .

When they run out of money , they will look to the state for financial support - and who will pay for it ?

Yes you and me

[Old_Geezer]

Mixed. Control is good for those capable, consequences dire for those who make errors. Maybe the market will shift and better deals pushed. Meanwhile it's an incentive to save whether you anticipate it as pension or just a future golden handshake.

[Old_Geezer]

"who will pay for it ?"
There is always the State Pension to fall back on. Some never find the finance to add to that anyway.

[mikey4444]

Not happy about this at all. It goes against everything that a pension is supposed to be for. I can foresee loads of people blowing their pension pots, and then realising that the State Pension isn't going to support them in their old age. If he had announced that there was going to an increase in the 25% that can be taken as a tax-free lump sum, then I could see some sense in it but this is plain daft. Not even Mrs Voldemort's Chancellors attempted this.

Its just stirring up problems for the future.

[ToraToraTora]

Broadly I welcome this, being forced to buy and annuity was always a nonsense. However I do echo some of the fears above that some will blow all their money and end up reliant on the state. I do think though that the sorts of people that save for retirement are those that would mostly not simply cash in and blow the pot, especially as the tax implications would hurt. So in reality it just means that retirerees will have more choices about income provision. It also means that current annuity providers will be forced to make their product more attractive. An annuity is still a good mechanism for providing income but the main bugbear is that the rates are derisory because of the low interest rates that are now pretty well ingrained. Hopefully this will force the life companies etc to come up with more creative options for retirement income.

[Jennykenny]

You seem to assume that people with less money are stupider than those with more money??

[ludwig]

// I can foresee loads of people blowing their pension pots, and then realising that the State Pension isn't going to support them in their old age //

The people who aren't saving, are effectively doing that already. The ones who have managed to scrape together some additional funds should surely be trusted to spend/invest them as they see fit, rather than it being kept by an insurance company that throws them a few crumbs every month from some rip-off annuity.

[LazyGun]

Good, broadly. Certainly might challenge the traditional annuity and pension management companies.

[ludwig]

// You seem to assume that people with less money are stupider than those with more money?? //

Who does?

[weecalf]

For the people who don't know what does this mean

[furrypusscat]

I know there will always be downsides to buying an annuity but at least it guarantees a weekly/monthly sum for the rest of your life. I thought that was the idea of putting money into a pension plan. I am quite capable of sorting finances but many won't think ahead and use their money for holidays new car etc. I think I will be sticking with the annuity.

[New Judge]

It should be a fairly simple matter to investigate whethe somebody has blown a huge load of wedge (their pension pot) when they cast themselves as destitute upon the State. In any case everybody is guaranteed a minimum income in retirement (currently around £143pw) whether they have made full contributions or none at all. The enormity of the headlines on this matter astounds me. What the headlines should read are "Chancellor allows people to draw their life's savings and spend the funds how they wish". Big deal. If they want to blow it all in a fortnight that's their affair. I only wish I'd be able to do the same with my State pension "pot". Might be able to buy a new shirt and have a day trip to Margate.

[youngmafbog]

Annutities are a rip off, no two ways about it. You will never see your pot returned in full unless you live to approx 110 which very few do. And that does not take into consideration the fact that an insurance company has a huge sum of money for potentially 30 years to use as they pretty much wish.

I can see some of the concerns raised above but as also pointed out those who have scrimped and saved are unlikely to chuck it away. It may also encourage some to invest in a pension who currently dont because they will be ripped off. I gave up funding a pension because of that very reason, even with tax breaks there was little point so I have invested myself in other ways. Mickey, I can assure you I wont be blowing that so why would I blow a pension pot ?

[mikey4444]

I have no idea ymb. My remarks were not directed at you personally. But some people might, as has been pointed out by others posters, not just me. Its a risk that this present Chancellor is prepared to take.

[New Judge]

There is no risk for him to take provided those who blow their pot "frivolously" are given no more in State pension and benefits than they would otherwise have received.

[mikey4444]

But who will the Chancellor be in 20-30-40 years time NJ ? What party will be in power ? That is the difficulty with pension regulations...any decision made now will not fully impact until well into the future. That is the uncertainty that will face future generations. I am not optimistic that enough people will be sensible when it comes to vesting their pension.

The State Pension is just about OK for the present OAPs but what of future ones ? My Grandparents had little when they worked, so didn't notice much different when they retired. But today's generation will have had a very enhanced working life and they will notice the downgrade in their financial status in old age much more that at present. Anyway, most of their pre-retirement expenditure will be still in place after they stop working. Mortgages will be mostly gone but food, electric, gas, petrol, council tax, etc will still need to be paid. In many ways retirement can be expensive ! That is why retirement planning is so important. My gut reaction is that this new regulation change is a retrograde step.

[youngmafbog]

But where is the risk in 30-40 years time, unless of course the State pension is means tested by then. But that in itself would be unfair to those who paid in anyway.

If you blow the pot then you will have to live on the State pension and not a penny piece more. If you live in poverty through your own greed and stupidity then tough.

But I doubt many will do that, there will certainly be a few but I am pretty sure it will be the minority.

The bottom line is insurance companies have taken us for a ride for many years. I know - I have worked on the systems for a few of them and seen the way it works. They are not in your favour at all.

[LazyGun]

"The bottom line is insurance companies have taken us for a ride for many years. I know - I have worked on the systems for a few of them and seen the way it works. They are not in your favour at all"

This is very true, and it is a shame that more people are not more aware of it.

[ludwig]

The insurance companies are worried about it. Apparently they'd prefer to keep hold of the money themselves - for your own good of course. They wouldn't want to see you spend it all at once and be upset that when you had none left.

As NJ says, it'd be nice if I could get my government contributions as a lump sum too, but as that's a huge Ponzi scheme where the money's spent as soon as it goes in, there's no chance of that.

[pixie373]

As the rest of the population are allowed to blow their savings in a week if they like, i don't see why pensioners need to be nannied and patronised. All seems upside-down to me.