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Government revolutionises the pension industry

The Chancellor George Osborne made some surprising announcements of Budget day with the announcement that there was to be a very big change in the way people save for their pensions. In what is seen by many as a revolution in the pension industry where people will be able to make their own decisions on where they want to invest their own money and not be forced to buy an annuity which often pays low rates of interest.

From next year people reaching the age of retirement will be able to spend their pension pot in any way they want. The government has said that the new rules will give retirees more flexibility and control over how their money is invested. in the opinion of many retirees this decision has not come a moment to soon as many feel they have been overcharged by insurance companies for setting up financial products around pensions.

The suggestion that pensioners will blow all of their pension on fast cars and expensive holidays is ill founded as recent evidence in Australia where retirees have access to their pension pots show that whilst some pensioners will go on extravagant holidays most will clear debts and are not irresponsible. The basic state pension that people will receive is just over £7,000 per year.

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It will be important for pensioners to seek out good advice because they will not escape the attention of the inland revenue if they take large chunks of money out in one go. A large amount will be treated as income and tax of 40% will be applied. Instead retirees will have to consider taking out smaller chunks over a period to time to avoid paying more tax than necessary. It will be prudent to seek out good sound tax advice. Some pensioners may stick with annuities but many will invest their money in stocks and shares and some will invest in property.

Investing in the property market

The fact that pensioners will be able to invest in property has alarmed some industry experts who already see house prices rising because too many buyers are chasing too few properties. Some experts believe that flooding the market with more buyers will simply add fuel to the fire that is already roaring away. However pensioners should be able to benefit from future house price increases by investing in the buy to let market just as many other landlords do.

The fact that pensioners will be able to invest in property has alarmed some industry experts who already see house prices rising because too many buyers are chasing too few properties. Some experts believe that flooding the market with more buyers will simply add fuel to the fire that is already roaring away. The Budget was seen as a victory for pensioners but pensioners that have already purchased annuities will feel hard done by as they will not benefit from the announced changes.

 

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The new changes will only benefit the 320,000 retirees every year who have a pension pot. The changes will be implemented in 2015 and will be great news for retirees whi will now have the freedom to make their own decisions. The annuities market has long been criticised by many experts because once pensioners sign up to them they are locked in for the rest of their life. o benefit from future house price increases by investing in the buy to let market just as many other landlords do.

Under the new rules what will be of major concern to everybody concerned will be the prsopect of mis-selling products again as fiancial advisors from banks gather to get their hands on all of this money. they will be competing against each other and may not give retirees a clear picture of what their products offer. The banks have a habit of lying to people and defrauding us out of our hard earned cash. Mis-selling insurance products, mis-sellig endowment policies, mis-selling mortgages, the list goes on. Pensioners will have to be very wary of the banks and their clamour to help.