Budget 2014: George Osborne’s pensions revolution

This will take a while to sink in – we simply have never seen this before in a Budget. George Osborne has just revolutionised the way pensions work; millions of people will have just found their pensions pot turned into a bank account. The punitive 55 per cent tax rate they faced if taking out more than they should from a pension has been abolished. And how much does this cost Osborne? That’s the beauty.

No wonder the Chancellor’s aides were briefing that he’d found a very radical, very ‘clever’ policy. This will make a massive pre-election difference to pensioners, the group most likely to vote at the next election. This bung to Tory target voters will be off-radar to the IFS and Labour because those guys only compute tax and spending changes – not welfare or savings. Osborne moves in their blind spot.

Is it a bung? ‘It’s a matter for people to choose how they spend their money,’ chirped Danny Alexander afterwards – but the Treasury’s forecasts assume that they will spend, spend, spend.