A pension crisis is brewing

Ten years ago, George Osborne blew up the British private pension system. Because pensions are boring and complicated and move slowly, a lot of people didn’t really notice. But the shrapnel from the blast continues to ricochet today and is starting to hit. 

Chancellor Osborne’s Budget on 19 March 2014 contained the surprise announcement of ‘pension freedoms’. Previously, people retiring with a Defined Contribution pension (a pot of money and very different to a Defined Benefit pension that is an entitlement to a certain income) effectively had to take their pension savings and use them to buy an annuity, a financial product  delivering an income for life.

Under the Osborne reforms, once we hit the grand old age of 55, we are all free to use our pension money however we wish. We can buy an annuity, if we really want to. We can ‘draw down’ those savings and spend them gradually to support ourselves.