Aspirational retirees have been sold a lie over pension perks

The idea that greater access to pension cash and the cutting of pensions death tax will benefit the middle classes is a red herring.

Chancellor George Osborne made a clever move on Budget day when he stood up and told savers they can access their pension in any way they want and more recently he set out more good news: the pension money that isn't accessed can be passed on to loved ones either tax free or at a lower rate of death tax.

The middle classes rejoiced but really the changes weren't for them, despite what Osborne says. You see, most people just aren't saving enough into their pensions that they will be able to afford to access a chunk of it in cash let alone have anything left to pass on to their children.

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Osborne has, very cleverly, sold them the idea of 'aspirational pensions' letting them believe that they are wealthy enough to benefit from changes to drawdown that will enable individuals to take chunk of money from their pension and still have enough to live on.

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Aspirational retirement
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The truth of the matter is the majority of people will have to use their pension to live on in retirement as they realise they can't afford to live on the paltry state pension, which they will receive at a later and later date.

As for using their pension as an inheritance tax (IHT) planning tool, who are they kidding? The average pension is around £40,000 and that money has to last a long time (the average person spends over two decades in retirement) – do people really think they'll have anything left at the end?

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In offering up pensions access and death tax cuts, the government has tricked people into believing they are wealthy and will live aspirational retirements, when in fact they people who will benefit most from increased access and death tax abolition are those who are significantly well-off and have plenty of money (we're talking a few hundred thousand) in their pensions. Financial analysts are already predicting annuities purchase will increase again after a recent slump as people realise they don't want to risk their small pension pots on the stockmarket.

Aspiration is no bad thing and it would be great if people aspired to be wealthier in retirement by saving more because unless they save more drawdown and death tax won't be of any benefit to them, despite what the chancellor wants everyone to think.

Read more:

Pension inheritance tax to finally be axed

Changes to pensions won't help young people save

What's wrong with income drawdown?