The Chancellor’s budget announcement that restrictions on pensions access are to be lifted have been slammed as “dangerous,” “short sighted” and “ill-conceived” by the chief executive of one of the world’s largest independent financial advisory organisations.
The comments from Nigel Green, the founder and CEO of deVere Group, come after George Osborne confirmed in the 2014 Budget that anyone over the age of 55 will from next year be able to take their entire pension pot as cash, depending on their marginal rate of income tax.
Mr Green notes: “This move to scrap the restrictions is in direct conflict with the spirit and purpose of pensions – which is to provide the individual with an income throughout their retirement.
“It’s a depressingly short sighted approach from the Treasury, which will be hoping to raise additional tax revenue in the short-term by allowing a greater number of people to receive all their pension funds in a lump sum.
“But should these people run their savings dry in the early stages of their retirements – as I suspect many will do, who will fund them? How will any of their potential housing, medical or care costs be financed for instance? It will, in the majority of situations, be down to the State – which is already in the midst of a deepening, and therefore increasingly costly, welfare crisis due to the ageing population.
“This policy of allowing a full drawdown is extremely dangerous and ill-conceived for both individuals, who are considerably more likely to become financially dependent on the State, and the wider economy, which needs the population to be as financially independent as possible to secure long-term stability, growth and competitiveness.”
However, Mr Green champions plans presented in the Budget to stop forcing individuals to buy an annuity at retirement.
He comments: “Releasing people from buying annuities should be welcomed. With many of today’s working population likely to spend three decades in retirement, it’s imperative that all possible barriers to saving adequately for older age are removed.
“This measure encourages people to save knowing that they can access the full capital rather than purchase an annuity, which have been offering very low returns in recent years.”