Budget could create ‘social nightmare’ warns York expert

Chancellor George Osborne. Photograph © altogetherfool on flickr
21 Mar 2014 @ 8.05 am
| Business
Playing with fire? Chancellor George Osborne. Photograph © altogetherfool on flickr
Playing with fire? Chancellor George Osborne. Photograph © altogetherfool on flickr

George Obsorne’s pension revolution could become a “social nightmare” – so says a York financial adviser.

The chancellor announced radical pension changes in his Budget speech on Wednesday (March 19)

People will no longer have to use their pension pot to buy annuities, and be free to withdraw the lot as a lump sum.

Simon Holt, managing director of Monks Cross based G&E Wealth Management, said the changes will revolutionise retirement for millions of people.

“However, I must sound a note of caution.

“If people are irresponsible in the way they use the new pension regulations, then these changes could become a social nightmare, which will come back to haunt them and the UK for many years to come,” said Mr Holt.

People will be able to take all of their personal pension fund at any age from 55, rather than being forced to draw some of it as an income for life.

“Clearly, a 55-year-old can typically expect to live another 25 years but the temptation to go on a huge spending spree is going to be too much for some to resist.

“This could have disastrous consequences, leaving people with nothing to live on in old age.”

If this happened, they would fall back on the State benefits system, putting “a huge strain on the State, as well as cause real hardship and deprivation,” he added.

“So the need for individuals to take professional advice has never been greater.”

Mr Holt made it clear that the new regulations affected all personal pensions and defined contribution company schemes, to which both employer and employee contribute to ensure a set level of pension on retirement.

The state pension is not affected.