15 March 2015
Last updated at 02:46
Chancellor George Osborne will say the changes could affect up to five million people
Chancellor George Osborne is expected to unveil plans to allow pensioners to cash in existing annuities as part of next week’s Budget.
The changes, which are not expected to come in before April 2016, could affect five million people.
Reforms announced last year that allow working people to cash in their pension savings will take effect on 6 April.
Shadow chancellor Ed Balls has said Mr Osborne “gives with one hand but takes away much more with the other hand.”
The pension reforms which were announced in last year’s Budget allow people to cash in all or part of their defined contribution pension when they retire, rather than buy an annuity that guarantees an income for life.
Pensioners had been required to buy annuities under the old rules.
The latest changes will give pensioners who have already retired a greater choice on how to access their savings in retirement, Mr Osborne is expected to announce on Wednesday, as part of his final Budget before the general election.
By BBC correspondent Alex Forsyth
The pension reforms that the Chancellor announced last year were the rabbit in the 2014 Budget box.
George Osborne managed to keep his radical shake-up of the pensions system quiet until he chose to reveal his grand plan during his Budget speech.
This year, it is less of a surprise. Extending freedom over annuities was a widely expected move – although it’s not without controversy.
There are those who argue that this freedom will tempt some pensioners to make short-term spending choices, leaving themselves short of an income in later life. But Mr Osborne’s view is that those who’ve worked hard and saved should be able to make their own decisions.
These measures have an obvious political point – to attract older voters. With the general election within spitting distance, Mr Osborne needs policies that don’t detract from his “long term economic plan”, but which prove popular with the electorate.
And crucially, he needs ideas that will be backed by his coalition colleagues. With this idea – which was previously floated by Lib Dem pensions minister Steve Webb – he thinks he’s ticked every box.
Mr Osborne’s expected announcement on pensions comes as Liberal Democrat Pensions Minister Steve Webb said he had been pressing the Chancellor on the issue.
He told the Daily Telegraph it seemed “particularly unfair that people who had been forced to buy an annuity could do nothing for the rest of their lives”.
BBC business correspondent Joe Lynam said the changes would only apply to retired people who have money purchase pension schemes.
The government is to ask the regulator the Financial Conduct Authority (FCA) to introduce guidance and consumer protection measures to ensure pensioners are fully informed of the changes and are protected from any mis-selling, he said.
Ed Balls claimed George Osborne’s Budget would “give with one hand and take away with the other”
The former government adviser and pensions expert Ros Altman welcomed the proposals but warned that a proper market for annuities was needed so that pensioners were not overcharged a second time, our correspondent added.
In his speech on Wednesday, Mr Osborne is expected to say his spending plans will deliver “a truly national recovery” and “will not be a Budget of pre-election gimmicks or giveaways” but instead a “Budget for the long-term”.
He is also expected to announce:
- Support for technology clusters around the UK
- Investment in the chemical sector in north-east England in the form of funding the Centre for Process Innovation
- Plans to introduce ultrafast broadband around the UK
- The creation of two new “enterprise zones” in Plymouth and Blackpool
- 45,000 new homes to be built on brownfield sites
However, shadow chancellor Ed Balls claimed Mr Osborne would give with one hand and take away with the other.
In an article for the Sunday Mirror, he said: “When he delivers this week’s Budget the Chancellor won’t be able to run away from five years of failure and broken promises.
“Working people are worse off. Independent experts at the Institute for Fiscal Studies say that tax and benefit changes since 2010 have cost families an average of £1,127 a year.”
Are you retired or soon to retire? What will these changes mean for you? You can share your experiences by emailing [email protected]. If you are available to talk further to a BBC journalist please include a telephone number.
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