Prime minister David Cameron has sought to drive home the political advantage gained for his Conservative Party following the move to liberalise pensions at last week’s Budget, using a speech today (24 March) to blast critics of the plans as being “deeply condescending” to savers.
Speaking to Saga members in Brighton, Mr Cameron said that concerns raised by some that pensioners will blow all of their funds when drawdown and annuity limits are removed cast savers as being “irresponsible”.
He said: “They’re not irresponsible people - that’s why they have saved all of their lives.”
Mr Cameron added that the plans, which will allow savers to take all of their funds as cash with only their marginal tax rate payable on the portion not already offered tax-free, would not leave pensioners to fall back on the state even if they did spend their entire fund.
He said this was due to the introduction of a flat-rate state pension, currently worth around £144 a week, which would “lift people out of a means-tested system”.
Mr Cameron added: “People are no longer going to be reliant on a means-tested system... this is not only the right thing to do but the right time to do it.”
He also referenced the pledge to boost “face-to-face advice” for pensioners in the Budget, describing this as “one of the most important” elements of the plans to ensure that savers fully understand the implications of any decision on their retirement fund.
Chancellor George Osborne announced in his Budget speech that the government is set to consult on plans to offer savers access to their entire pension fund without having to pay the current 55 per cent unauthorised tax charges or prove any minimum income. The reforms are set to go live in April 2015.
Until then and from the end of this month, a relaxed drawdown system will be in place that will allow savers to take an income equal to 150 per cent of GAD rates, or unlimited income under flexible drawdown if they can prove a lower minimum income of £12,000.
Analysts have predicted the Budget reforms could devastate the single annuity market, with some saying it could result in 90 per cent fewer annuity purchases than now.