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Budget 2014: Ministers defend pension income overhaul Budget 2014: George Osborne defends pensions overhaul
(about 5 hours later)
Ministers have defended major changes to pensions in the Budget, saying they are giving people "more control" over their finances in their retirement. Chancellor George Osborne has defended changes to pensions in the Budget, saying people "are capable of making decisions" over their future finances.
From 2015, pensioners will have the freedom to cash in as much or as little of their pension pot as they want, removing the need to buy an annuity.From 2015, pensioners will have the freedom to cash in as much or as little of their pension pot as they want, removing the need to buy an annuity.
In response, firms which sell such policies saw their share prices tumble.In response, firms which sell such policies saw their share prices tumble.
The insurance industry said the reforms presented a "significant challenge" and it was "crucial" to get them right.The insurance industry said the reforms presented a "significant challenge" and it was "crucial" to get them right.
Chancellor George Osborne said the pension changes were part of the "most far-reaching reforms" to the taxation of pensions for 90 years. Mr Osborne said the changes were part of the "most far-reaching reforms" to the taxation of pensions for 90 years.
In his fifth Budget - 15 months away from the next general election - the chancellor sought to help pensioners and savers penalised by the low interest rates of the past seven years. "People who have saved through their lives, saved for a pension, these are responsible people who are capable of making decisions - with good advice - about their future," he told the BBC.
"The truth about annuities is that, for many people, they will want an annuity, but for many other people annuities have not been good value, they've not produced the kind of incomes people hoped."
'Patronising' advert
Pensions changes were among a series of measures announced in a Budget that Mr Osborne said would reward the "makers, doers and savers".
However, hours after he outlined his Budget, the Conservatives faced a backlash over an advert highlighting changes to beer and bingo taxes.
The online advert, tweeted by Tory chairman Grant Shapps, said the cuts would "help hardworking people do more of the things they enjoy".
It was described as "patronising" by Mr Osborne's deputy, Chief Secretary to the Treasury Danny Alexander, who said he initially thought it was a "spoof".
Labour said it was "ill-conceived" and "condescending". Mr Osborne said the controversy had been "whipped up by the Labour Party who didn't have anything else to say about the economy".
In his fifth Budget - 15 months away from the next general election - the chancellor sought to help pensioners and savers penalised by low interest rates.
He also announced:He also announced:
But a post-Budget row over a Conservative advert promoting the bingo and beer duty cuts escalated after Lib Dem Danny Alexander - Mr Osborne's deputy - said it was "patronising".
The ad, which suggested the cuts would "help hardworking people do more of the things they enjoy", was criticised as "condescending" by a number of senior Labour figures.
Personal finance experts said the proposed changes to annuities - bonds which provide a fixed income for the rest of the owner's life - will significantly change the way people fund their retirement.Personal finance experts said the proposed changes to annuities - bonds which provide a fixed income for the rest of the owner's life - will significantly change the way people fund their retirement.
It is expected that anyone over the age of 55 who belongs to a defined contribution pension scheme will be able to take out their savings as a lump sum to spend or invest as they like.It is expected that anyone over the age of 55 who belongs to a defined contribution pension scheme will be able to take out their savings as a lump sum to spend or invest as they like.
While people are not obliged to buy an annuity at the moment, there are hefty financial penalties for not doing so and an estimated 420,000 policies are sold every year.While people are not obliged to buy an annuity at the moment, there are hefty financial penalties for not doing so and an estimated 420,000 policies are sold every year.
'Patronising' 'Right choices'
But announcing plans to reduce the amount of tax paid on pension "draw-downs", Mr Osborne said people should be able to decide what to do with their income in retirement.But announcing plans to reduce the amount of tax paid on pension "draw-downs", Mr Osborne said people should be able to decide what to do with their income in retirement.
"The tax rules around these pensions are a manifestation of a patronising view that pensioners can't be trusted with their own pension pots," he said. "I reject that.""The tax rules around these pensions are a manifestation of a patronising view that pensioners can't be trusted with their own pension pots," he said. "I reject that."
Speaking on BBC Newsnight, Liberal Democrat Treasury Minister Danny Alexander said people should be allowed to make "the right choices for themselves". Speaking on the BBC's Newsnight programme, Lib Dem Mr Alexander said people should be allowed to make "the right choices for themselves".
Asked whether people would simply spend the money in one go on a holiday, he said this was "possible but unlikely" and the changes would make the annuities market more competitive.Asked whether people would simply spend the money in one go on a holiday, he said this was "possible but unlikely" and the changes would make the annuities market more competitive.
In the wake of Mr Osborne's announcement, shares in Legal and General fell 8% and Aviva dropped 5% amid City concerns about the impact on their business of the changes.In the wake of Mr Osborne's announcement, shares in Legal and General fell 8% and Aviva dropped 5% amid City concerns about the impact on their business of the changes.
The National Association of Pensions Funds said the move - which is expected to boost the Treasury's tax receipts in the short term - would place a "great burden" on many people who did not feel confident about choosing the right option for them.The National Association of Pensions Funds said the move - which is expected to boost the Treasury's tax receipts in the short term - would place a "great burden" on many people who did not feel confident about choosing the right option for them.
The Association of British Insurers said it was right for people to be offered a range of options on retirement including the prospect of a "guaranteed lifetime income" provided by an annuity.The Association of British Insurers said it was right for people to be offered a range of options on retirement including the prospect of a "guaranteed lifetime income" provided by an annuity.
"These changes represent a significant challenge for everyone involved in helping people secure their retirement income," its director general Otto Thoresen said. "It is crucial to get them right.""These changes represent a significant challenge for everyone involved in helping people secure their retirement income," its director general Otto Thoresen said. "It is crucial to get them right."
'Picking up tab''Picking up tab'
While supporting changes to annuities, shadow chancellor Ed Balls said ministers needed to consider the implications of their proposals.While supporting changes to annuities, shadow chancellor Ed Balls said ministers needed to consider the implications of their proposals.
"Will people with ordinary-sized pension pots be able and encouraged to withdraw all of their pension savings from their pension pot and either try and invest it themselves or spend it?" he asked."Will people with ordinary-sized pension pots be able and encouraged to withdraw all of their pension savings from their pension pot and either try and invest it themselves or spend it?" he asked.
"And if they do, what happens when the money runs out? Who then picks up the tab?""And if they do, what happens when the money runs out? Who then picks up the tab?"
During his speech, Mr Osborne also unveiled plans to support economic recovery - including tax breaks to boost productivity, exports and manufacturing.During his speech, Mr Osborne also unveiled plans to support economic recovery - including tax breaks to boost productivity, exports and manufacturing.
He said Britain was growing at a faster rate than any other advanced economy - revising growth forecasts up to 2.7% in 2014 - but he warned the job of recovery was "far from done".He said Britain was growing at a faster rate than any other advanced economy - revising growth forecasts up to 2.7% in 2014 - but he warned the job of recovery was "far from done".
But Labour said most people had seen their disposable income fall since 2010, describing it as a "worse off Budget from an out of touch chancellor". But Labour said most people had seen their disposable income fall since 2010, describing it as a "worse-off Budget from an out-of-touch chancellor".
Do you have a Budget question for one of our experts? Email us at haveyoursay@bbc.co.uk adding 'Budget' in the subject heading and including your contact details.Do you have a Budget question for one of our experts? Email us at haveyoursay@bbc.co.uk adding 'Budget' in the subject heading and including your contact details.