Minister fuels pension debate with Lamborghini comment
- 21 March 2014
- From the section UK Politics
The government has defended a minister who said pensioners would be free to spend their savings on a Lamborghini following a rule change in the Budget.
From 2015, people reaching retirement age will be able to use pension pots however they want, rather than having to buy a guaranteed annual income.
Pensions minister Steve Webb said it was people's "choice" whether to buy Italian Lamborghini sports cars.
No 10 said people were free to spend money in their own way.
Chancellor George Osborne has dismissed fears newly retired people could "blow" their pension pot.
Mr Webb, a Liberal Democrat, told the BBC's Norman Smith he was "relaxed" about how people spent their money.
He said: "If people do get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and that is their choice."
The Lamborghini Huracan, unveiled earlier this month at the International Motor Show in Geneva, is to be sold at about £165,000.
A Downing Street spokesman backed Mr Webb, saying it was not up to the government to give advice on how people chose to manage their savings.
He added that under the rule changes pensioners were guaranteed independent advice before making any decision about their pension provision.
'Treated as adults'
Mr Webb later told BBC's Newsnight that the average pension pot was £25,000 so "not many people will be buying sports cars".
"It is people's own money," he said. "We are not going to cast them adrift. We will guarantee them guidance, information, education but ultimately we are making sure they have a decent state pension but if they want to spend their money sooner rather than later, we are treating people as adults."
Personal finance experts said the proposed changes to annuities - bonds which provide a fixed income for the rest of the owner's life - would significantly change the way people fund their retirement.
It is expected that anyone over the age of 55 who belongs to a private pension scheme (as opposed to a final-salary scheme) will be able to take out their savings as a lump sum to spend or invest as they wish.
Mr Osborne dismissed concerns that retired people would spend all their pension at once and end up relying on the state.
"It's all part of a coherent pension reform," he told BBC Radio 4's Today programme.
"So we have a more generous basic state pension, less means-testing and that enables us to get rid of a quite old fashioned set of government requirements, put in place many decades ago, that people had to take out annuities.
"While annuities might be right for many people, they are not right for many, and returns from annuities have been much lower over the last 15 years or so.
The Institute for Fiscal Studies said the new pension rules could mean more money for the Treasury if people opted to extract taxable lump sums from their pension pots.
But, the think tank added, it was difficult to predict how people would behave and the government could be left short of money for tax cuts announced on Wednesday.
Labour's shadow chancellor Ed Balls said he supported the "principle" of more flexibility over pensions, because the annuities market is "not working" and "people are being ripped off".
'Beer and bingo'
But he said scrapping the requirement to take out an annuity altogether was a potentially "reckless and irresponsible" move, which could "leave people running out of money".
"Will people with ordinary-sized pension pots be able and encouraged to withdraw all of their pension savings from their pension pot and either try and invest it themselves or spend it?" he asked.
"And if they do, what happens when the money runs out? Who then picks up the tab?"
Pensions changes were among a series of measures announced in a Budget that Mr Osborne said would reward the "makers, doers and savers".
However, hours after he outlined his plans, the Conservatives faced a backlash over an advert highlighting changes to beer and bingo taxes.
The online advert, tweeted by Conservative chairman Grant Shapps, said the cuts would "help hardworking people do more of the things they enjoy".
It was described as "patronising" by Mr Osborne's deputy, Chief Secretary to the Treasury Danny Alexander, who said he initially thought it was a "spoof".
Labour said it was "ill-conceived" and "condescending".
But Mr Osborne said the controversy had been "whipped up by the Labour Party who didn't have anything else to say about the economy".
Conservative sources told BBC News they were "completely relaxed" about the tweet and "astonished" by the row, adding it would not be "pulled" because it was a "one-off" message and not part of any campaign.