Pensions Minister, Steve Webb, has floated the idea of letting pensioners cash in their pension savings for a lump sum to spend in retirement. Acumen takes a closer look at his proposal and ponders the consequences if the policy comes to fruition.
Behind the scenes in Whitehall, Liberal Democrat pensions minister, Steve Webb, and the Department for Work and Pensions are hatching a plan that might just revolutionise your retirement. If the Conservative coalition gives the green light, retired workers could have the opportunity to sell their pension savings to the highest bidder.
This extension to existing plans, which take effect in April and allow people currently of working age to cash in their pension savings in retirement, would afford existing pensioners the same right. The upshot of which, is a tidy lump sum to spend on whatever they like. A Lamborghini if they see fit, Mr Webb reportedly said.
According to a BBC report, Mr Webb said: “To be honest, I would hope that all parties will say that people who have worked hard and built up a pension pot should be given the freedom to do what they want with it, rather than have the government tell them how to spend their own money.
“It should not be the government saying ‘we insist you take your retirement income in one particular way’,”
Labour has been critical of the proposals to scrap the requirement to take out any form of annuity however. They have raised concerns that the “reckless and irresponsible” move could leave over-stretched pensioners penniless.
Acumen’s thoughts on the new Pension Proposal
For anybody of a pension age, who has worked hard all their lives and saved diligently for their retirements, this news must surely come as a great boost. If the plans go through, that could free up a significant lump sum for many pensioners to enjoy their hard-earned pension savings exactly how they’d like. Of course, having been so frugal throughout their working lives, I doubt that the vast majority of pensioners will carelessly squander their money as Labour fear. However, it is imperative that they seek independent financial advice to plan their investments wisely. That way they can ultimately keep enough money in reserve to enjoy a long and happy retirement.