Will Osborne overhaul resolve savings crisis?

Ashley Wassall

There was only ever going to be one story to lead our digest of the week’s financial services news.

It’s the biggest story that has emerged in my three years as editor of FTAdviser and since my first year in financial journalism - though that was the year the credit taps were turned off and the whole world went into financial meltdown. That’s a hard one to beat.

I’m talking, of course, about the pension reforms announced at this Wednesday’s Budget that have sent shockwaves through the annuities market.

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You’ll know all about it and don’t need it spelling out to again I’m sure. Suffice to say: from next year and subject to consultation, people will be able to take their entire pension as cash and only pay their marginal rate tax charge on the 75 per cent of their pot that is not already offered as a lump sum tax free.

I’m interested in hearing thoughts from readers on what this will do for savings, which are almost non-existent in this country at the moment.

Do you subscribe to the view espoused by Ros Altmann and a number of think-tanks that many people will blow all of their pension pots in bacchanalian orgies before falling back on the state - the last thing we need given the parlous state of our long-term national finances?

Or do you think people will actually be incentivised to save more now that they know they will not be trapped into buying poor-value annuities or tied to complex drawdown limits?

My view: I hear from commentators all of the time that many of those who could provide for themselves do not do so because pensions are seen as a profiteering vehicle for providers that are too complex to understand and too restrictive to make them worthwhile.

If this goes some way to alleviating that, I think more people will actually consider putting money aside, which is precisely what we need.

I also think most will decide against blowing all of their savings they’ve spent a lifetime putting together - but frankly, that’s up to them.

Providers plummet

The biggest side-effect of the pensions overhaul has been the panic that gripped markets as analysts predicted - and continue to do so - the “death” of individual annuities. Some £4bn was wiped off the shares of seven listed firms on the day, while one firm, Partnership, had shed more than 60 per cent of its value by the close yesterday (21 March).

Today we revealed that four major life offices - and there may be more - have suspended processing business, while a further two have extended cancellation and guarantee periods, to allow people time to assess how the changes affect their decision. For all the details click here.