Will we gamble with our retirement?

Having slept through the first forty minutes of the Chancellor’s budget speech today it was a bit of a rude awakening to hear the last five minutes turn into the biggest shake up of the ISA and Pension rules for years.
All positive for ISAs I have to say. I’ve long believed that it was crazy to have Cash and Stocks & Shares ISAs split the way they were so to combine them into one, and to increase the limit to £15,000, is perfectly sensible.
I can’t say the same about his plans for pensions. The whole idea behind personal pensions (or defined contribution schemes as the Chancellor called them today) is that they will build up a fund of money to help you in retirement. That is why there was a limit to the way you could access your money when you did stop work, and why you couldn’t just take it all out on day one and spend it! The limit was too small and needed to be changed since it actively discouraged savers from investing for retirement, but to go from being allowed to take out around 5% of your fund a year to the position from next April when you can take 100% is crazy.
I’m not saying that everyone will spend everything at once, and the Chancellor did say that it was time to make savers responsible for their own savings, but some will. And what will they do for funds on day two once the money is gone?
And of course the cynic in me reckons that the Chancellor had more than half an eye on the fact that all this extra money being taken out of pensions is potentially taxable, thereby increasing HMRC tax take. A lot of it will be spent, and go straight back into the economy, and with a really cynical head some of it might be used to help the tens of thousands of borrowers who have interest-only loans with no means to repay them.
A major change that could have done with a bit more thought I feel. Or then again, maybe he gave it lots of thought and had two eyes firmly fixed on the pensioners and soon-to-be pensioners who will benefit from the changes and who may just feel inclined to vote for the Chancellor’s party at next year’s election.

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