Pensions reform 'to help 400,000'

File photo dated 03/05/10 of two women walking along the beach in Bournemouth as one in 12 people planning to retire this year will still be paying off their mortgage. PRESS ASSOCIATION Photo. Issue date: Friday January 24, 2014. Prudential, which carries out research each year to gauge the state of people's finances as they approach retirement, found that one in six (17%) people ending their working lives in 2014 will still be burdened with some form of debt, including mortgages, credit cards or personal loans. Some 8% of those planning to retire in 2014 said they still have not fully paid off their mortgage and around 10% still have credit card debt piled up. On average, those who still have some form of mortgage and/or non-mortgage debt owe ?24,800, although this figure is around one fifth (21%) lower than the typical debt in 2013 of ?31,200, researchers found. Across Britain, Scotland had the highest rate of people retiring this year with debts outstanding. Nearly one quarter (24%) of people retiring in 2014 there said they would have some form of debt. See PA story MONEY Retire. Photo credit should read: Chris Ison/PA Wire

%VIRTUAL-SkimlinksPromo%Up to 400,000 people will benefit immediately from the coalition's radical pensions shake-up, David Cameron has said.

The Prime Minister, who will attempt to capitalise on the positive reception for the changes today by meeting Saga members in Brighton, said they represented core Tory values.
Meanwhile, London Mayor Boris Johnson has hailed the policy as "Thatcherite" - but risked fuelling concerns about a housing market boom by saying "huge numbers" of people would now sink their retirement savings into property.

The interventions came after Labour said it supported the principles behind the surprise overhaul unveiled in George Osborne's Budget last week.

The Chancellor announced moves to scrap rules that force most pensioners to use their direct contribution funds to buy an annuity, even though the rates can be poor.

Although most of the reforms will apply from April next year, a number will be brought in from Thursday to ensure people close to retirement do not miss out.

Individuals with total pension savings of £30,000 or less will be able to take the full amount as a lump sum, nearly double the current £18,000 limit.

The minimum annual income required to access a pension fund flexibly will also be cut from £20,000 to £12,000, while access rules will be eased so people with substantial pots can draw higher incomes.

Speaking ahead of his visit, Mr Cameron said: "This is about our values. It's about backing those who work hard, save and do the right thing. And it's about saying that the best people to look after their money are those who earned it in the first place.

"Labour have been all over the place. First they come out with the patronising nonsense that people can't be trusted to spend their own money sensibly. Then they back our plans. Then they're not sure.

"So the contrast is clear: while Labour dither and flail around for ideas, we have made long-term changes that will give millions greater security in old age.

"Labour ignored Britain's savers, we are on their side. Labour punished those who work hard and play by the rules, we are on their side.

"This is an historic change - the biggest revolution in pensions and savings for 100 years - and I'm proud the Conservatives have delivered it."

In his regular Daily Telegraph column, Mr Johnson welcomed the package as a "grenade".

"The decision to make it possible for people to decide what to do with their own pension pot is Thatcherite in its elegance," he wrote.

"It is free market, it is libertarian, it is all about trusting people to run their own lives - and, as the wretched Labour party is finding out, it is very hard to disagree with."

He added: "I don't think many will end up blowing it on Italian cars, actually.

"I think the vast majority will want to put their pots into the market with the greatest yield in the last 40 years - and that is property; and I expect huge numbers of those approaching pensionable age will be thinking about how they - the baby-boomers - can do something to help the younger
generation with the single biggest problem they face, namely the cost of housing.

"This pensions change is not a social disaster, but a wonderful opportunity.

"It is a chance for the older generation to find that sudden wodge of dosh that will enable them to help their children or grandchildren find a deposit and get on the ladder; and the existence of those new deposits will give developers even greater confidence to build more homes - and faster than they are now.

"I am not saying all pensioners will follow such a path of enlightened self-interest; but large numbers will."

Mr Miliband was seen as having dodged taking a position on the issue in the Commons, and while some Labour MPs have since condemned the move, others have urged the leadership to support it.

Pressure mounted after two polls over the weekend suggested the Tories had effectively wiped out Labour's advantage.

Shadow work and pensions secretary Rachel Reeves insisted the party backed the shake-up in principle.

"We support reforms to the pension market, so people can get a better deal and have more flexibility, especially at the moment, when people are just not getting a very good deal on their annuity," she told Sky News' Murnaghan programme.

"We're talking about people here who are coming up to retirement, who have saved all their life, and put things aside.

"I think we can trust those people to make sensible decisions about how they want to support themselves in retirement."

Mrs Reeves argued that the Government had not "gone far enough" in the Budget, and should also impose a cap on fees and charges by pensions and annuities firms.

Acknowledging that some in her party had concerns about the plans, the MP said she wanted to be certain that the measures would "benefit people on modest incomes and not just the privileged few".

Shadow business secretary Chuka Umunna declined to say whether Labour would vote in favour of specific legislation.

"We need to see the Bill and I'm not going to sign a blank piece of paper," he told the BBC's Andrew Marr Show.

Shadow Treasury minister Chris Leslie also questioned whether Mr Osborne was merely trying to raise revenue.

"This is something the Chancellor has done, he claims, for reasons of freedom and flexibility but is it just a coincidence he is grabbing quite a lot of tax from pensioners early on to plug a hole which is necessary because the deficit has not gone down," he told the BBC's Sunday Politics.

7 ways to improve your retirement
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Pensions reform 'to help 400,000'

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.


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