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[/audioplayer]It is easy to see why George Osborne seemed so confident ahead of the Budget. His radical reform of the pension system, allowing people far easier access to their pension pots, will not only help the retired (in the short term) but will raise money for the government, as it taxes what they spend.
The Chancellor boasted that this was the biggest single reform to the pension system since the 1920s, and he has a point. Until now, the system had operated on the premise that people should save, and that banks normally offer reasonable rates of interest. In debt-addicted post-crash Britain, those rules have ceased to apply. The government has kept interest rates nailed to the floor.
Osborne’s reforms will go a long way towards helping pensioners. With them — and with the government itself offering interest rates of up to 4 per cent — the Chancellor seems to have given up on the idea that the system will return to normal. Pensioners are, of course, more likely to vote than any other section of the electorate. If he could not offer a cash bribe, such as Labour’s winter fuel payment, then it is far cheaper to lift the rules on people accessing their own cash. The rationale for limiting the amount that can be withdrawn from a pension tax-free was that people could end up in trouble if they drew it down too quickly. So people will be able to spend more of their pension now — but what will be left in ten years’ time? Osborne seems happy to trust pensioners to make this judgment for themselves. After the pain they have suffered, and will continue to suffer if low rates continue, that will be welcome.
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