The budget proposals to free up pension pots. Right or wrong?

Yes Bez- I wondered about that, if you have income from an annuity, it counts as income when calculating any entitlement to means tested benefits so it could be seen as unfair if a lump sum from your annuity pot did not affect any benefits you might be entitled to under the capital rules. As always with these sort of announcements, the devil us often in the detail - it will be interesting to see how it pans out

I wondered if having a 'pot' of money somewhere in savings other than annuity would make some people too rich to qualify for any benefits - it would certainly do so if a pension credit type top up was available and maybe affect reduction in Council Tax. I have not seen anyone saying there would be disadvantages such as this in the scheme but I cannot believe that people could have their money and spend it , if they so wish, and be reliant on top up benefits. Is this a backdoor method of making less people able to receive benefits of any sort?
I do not know any of the figures about benefits as they are now as we are fortunate enough that our income means we would not qualify for any - and the pension of £140 per week sounds great but in reality is not much more than many people receive now.

And an annuity is based on your individual characteristics eg gender, age, health whereas final salary averages all the risks out across the members

I think the difference between final salary and defined benefits pensions is that with the latter there is an identifiable sum of money with your name on it ( so to speak) whereas with final salary there is no individual sum of money but an entitlement based on the conditions of the scheme such as one sixtieth of final salary times by number of years of contributions.

Erm, what pension?

The question I was about to ask has just been answered by soupy and papaoscar . So those of us with a final salary work pension are not able to benefit (if that's what it is) from this.

£100,000 is not a big pot of money in terms of the annuity it will buy.

Yes, Soupy, I wonder why those still involved with final-salary schemes are not also permitted to release more of their pension entitlements. In theory, all pensioners should be free to make their own pension decisions, which prompts me to think, why have any pension arrangements at all, even as regards the basic state pension. Then we could all choose how to spend all of our money all of the time.

The down side of that apparent liberty would, of course, be that some people would make no, or little, provision for their retirement, spend their money on other things, and possibly end up in retirement poverty having to work until the grim reaper released them. Not a happy prospect for them or society in general.

I have always thought that the old idea of the state requiring and encouraging people to make provisions for their old age was the best way, and I am alarmed at the sudden 'about face' in the budget. Another aspect of this which worries me is the grasping nature of much of the finance/banking industry which seems to have regarded a rush for quick profits using low, or no, ethics as primary features of their business models. Have they changed their ways? Do I trust them? Whose interests are the government really concerned with?

So what to do? Just shuffle off towards that great escalator in the sky when you get old, perhaps, and relieve society of any further responsibility? Suggestions on a postcard, please...

And don't forget that it's only for people with defined contribution pensions.

Those of us in final salary schemes will carry on as usual - well this is my understanding of what I've read.

I think it's a way of the government getting a lot of tax sooner rather than later from lots of pensioners.
I also find it strange that some of you are advised that £100,000 is not a big pot. You would think you were rich if you had that amount of money in your bank account.

The average pension pot I believe is £25k . Might be sensible to pay off credit card debt but I think a Lamborghini starts at over £100k. Not sure what sort of properties can be bought for £25k as buy to let.
Perhaps gransnet could have a Q&A with a reputable pensions advisor.

Completely impartial opinion here, as I am no expert on pensions and do not have a pension-pot of any kind, (apart from my piggy bank where I save £1 coins), but it sounds like a good idea to me. It gives people a greater choice over their own money, it seems.
Most people will be sensible with it, I imagine.

I find it hard to see how anyone with a substantial pension pot who is probably very used and to a good lifestyle would be imprudent enough to blow all their money on high living and then be prepared to live on state benefit.

Re buy to let, unless you can afford a lot of property this could be very risky. There have been a number of people who's own properties or buy to lets have gone into negative equity. It's a question of being lucky with timing when you buy or need to sell.

Eloethan I agree that people may be tempted into Buy-to-let, with potentially disastrous consequences for young people trying to buy their own home, but I still think that compared to buying an annuity, where the income is guaranteed for life, it's a risky business and people tend to underestimate the costs of maintaining the property and the fact that there may be longish periods when they don't have a tenant and there won't be any income.

Not "interest", "commission".

Those that have substantial "pension pots" can use the money to purchase a buy-to-let property/properties - this could be a very attractive option for obtaining a regular income. Since properties outside of the south-east are generally cheaper, this might result in a housing boom in those areas. and make property much less affordable for younger people. It may also further increase property prices in the south-east - which is already in a dire situation.

Those whose "pension pots" are not enough to enable them to buy a property, may be tempted to take a cash sum and keep dipping into it until very little is left.

In the short term, there may well be more money available to spend in the economy and thus help businesses but at least some of the money may go on luxury consumer goods (and no doubt imported consumer goods) and, possibly, foreign holidays, which will not help the British economy in the long term.

I feel it is a sort of "bribe" to older people to create a temporary "feel good factor".

It might have been more sensible to raise the amount that people can take as a lump sum, as well as ensuring that annuities offered better value for money and that fund managers weren't charging excessive amounts of interest.

Labours Rachel Reeves told BBC 4 ,Any Questions, she supported the changes announced in Wednesday's Budget.

But she said much more detail was needed about what the changes would mean 'in practice'. So I guess it has cross party backing, at the moment.

I haven't particularly noticed and outcry of rubbishing it and on a personal level I am in favour of it. I also think it is a good thing to have the 'cooling off' period for those who recently signed but now wish to change their mind and take the new option.

I have to admit I certainly do not profess to know much about pensions so I am only going on what I have heard and read in the media.

Yes mollie65 I totally agree with you. I was taught from a young age to save and I have continued to do so all of my life. I would like to think that I am financially astute. At times I put the "poor pensioner" hat on and say sorry, I really cannot afford that, it always works.

listening to a discussion on this on R4 and there seemed to be a bit of an attitude 'how can they question that people will not be savvy enough to look after their own money'
the answer is some people are financially astute but lots of others are not able to withstand a slick salesman/ financial adviser who promises 'riches' - hence why the mis-selling bandwagon keeps rolling.

This is what has happened to many people in Australia, where give us all your money and get rich quick wealth creating schemes took off with disastrous results.

I'm concerned that the newly retired with their retirement money hot in their hands will fall prey to the same unscrupulous financial advisors and bankers who have preyed on the innocent and gullible so many times before. After all, nothing much has been done to properly regulate an industry which has ripped so many people off unmercifully over such a long time.

I used to discuss this with a friend and we both felt that we should be able to get hold of our own money. At the time we had to change our AVC funds into annuities at the same time as receiving our pensions.
Sadly my friend certainly did not receive much of hers back - and she had never shown any sign of illness.

Of course, people will still be able to purchase annuities with all or part of it if that is what they choose. I expect the financial wizards are beavering away at this very moment with some new alternatives.

I have my work pension and also my state pension. I have FSAVCs but they are not worth that much so I have been hanging on for a Chancellor to do just this. I will remove 25% tax free but I will have to be careful, re the amount of money I take out after that as there is little leeway re paying taxes. I will not be buying a new car (not enough money), mine will go into ISAs or some other tax free savings. Maybe even premium bonds and the money will still be mine.

Mollie65 I agree with you - I had a similar pension pot to you, and fully expect to live long enough to get my money back.
I like the security of knowing that the income will be for life.
My IFA advised against drawdown though, given the size of the pot.

Good point Rosequartz. Important if you have most of your pension pot in an annuity based scheme. X