Prudence set to prevail as folk pay off their debts
The pension reforms which come into force on Easter Monday bring a hefty new responsibility to many people. But there is a school of thought which suggests that the Chancellor’s reforms, announced in the Budget last year, are simply giving people the right to do what they will with their own savings.
Previously, retirement savings have been limited to an annual sum in the form of an annuity. Now the new system means that people will be able to benefit from the entire sum all at once.
The paternalistic, nanny state view is that not everyone will have the financial nous to take on the responsibility which a large sum of money brings. Imagine if the majority of workers were granted their salary in one lump sum at the start of the year instead of it being doled out in monthly portions. But the Government’s thinking — and that of Lib Dem pensions minister Steve Webb — has been that over-55s are wise enough to handle that responsibility, and are mature enough to have figured out sensible spending priorities.
His declaration that the age group should be able to blow it all on a Lamborghini and then resort to the state pension if they wish, could go down as one of the most reckless statements ever made by a government minister — that is, if things do go wrong. But here in Northern Ireland, financial advisers are predicting — on the basis of what their clients are enquiring about — that good old Ulster prudence will prevail.
Instead of blowing a pension pot on a fast car, thereby precipitating a late mid-life crisis, our older population will instead use it to pay off their debts.
So I wouldn’t go anticipating a long queue at the car showrooms this Easter Monday.