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Retirement: 2014 in review


In the retirement sector, there was one major story this year – the shock announcement in the Budget that savers would have more freedom with their pension pots.

The news means that from April next year, people retiring will have a far greater degree of flexibility in how to use their savings. No longer will retirees be compelled to either prove that they have the means to support themselves to the tune of at least £12,000 a year or be forced into buying what may be often a poor value annuity.

A new-found freedom

Retirees will be able to take some or all of their pension pot as a lump sum – with 25% tax free, as at the moment – and do with it as they see fit. For some people, that might mean drawing out all the money and buying a sports car, but for most people, it will probably mean treating their pension savings a bit like a bank account and taking out money as and when it is required.

(You have to feel sorry for Steve Webb, the Lib Dem pensions minister – widely liked in the industry, and one of the few people to really get to grips with the enormous complexities surrounding pensions, he’s now best known for a comment about pensioners buying Lamborghinis with their pension pots, which he didn’t even say…)

The details of how people will access their money are still being worked out – which with about four months to go is cutting it a bit fine – but this is a seismic change in the pensions landscape.

From the government’s point of view, it expects around 130,000 people a year to use their new rights. It also expects the move to generate additional tax revenue, as Osborne said at the time: “The OBR confirm that in the next fifteen years, as some people use these new freedoms to draw down their pensions, this tax cut will lead to an increase in tax receipts.”

This is because the government expects people to take out large sums, putting them into a higher income tax bracket.

The details of how people will access their money are still being worked out – which with about four months to go is cutting it a bit fine – but this is a seismic change in the pensions landscape.

Automatic for the people

The other, quiet success of the year has been automatic enrolment. It’s likely that your children or grandchildren, if they’re working, will have been automatically signed up to a pension scheme rather than having to choose to fill in the forms.

Automatic enrolment, which will have affected about 10 million people by 2018, has stopped the long term decline in the numbers of people saving for a pension. The government’s figures for the first year of the policy being in effect show a jump from 5.9 million saving in a pension – or 42% of the eligible workforce – to 6.7 people, or 42%. The bulk of workers are yet to be enrolled.

But people may need to start taking more responsibility for their futures, if Michael Johnson of the Centre for Policy Studies, is to be believed. According to Johnson, the government’s own calculations show that the National Insurance Fund, which is used to pay the State Pension, will be empty by 2035-36. Johnson has a track record in dire prognostications over pension provision, usually with some merit.

As well as working longer – he suggests a State Pension Age of 70 “seems inevitable” – the parlous state of public finances and the extra financial stress caused by the ageing population, means the State Pension will be “progressively watered down” with the warning that “in the long-term, is any meaningful State Pension financially viable?”

What will 2015 bring for the pensions and retirement sector? If you were Chancellor, what changes would you have made in the Budget? Share your opinions with us below.

This article has been commissioned by retiresavvy and any opinions voiced are the author's own.


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