Savers Will Not Blow Pension Pots, Says IDS
Savers are not suddenly going to blow their pension pots on Lamborghinis and yachts because the Government has relaxed the rules on annunities, Iain Duncan Smith has said.
The Work and Pensions Secretary told Sky's Murnaghan programme it would be against type for those who had saved all their lives to suddenly "behave irresponsibly".
George Osborne relaxed the rules on annuities in Wednesday's Budget to give savers greater control over their pension pots.
The changes - the pension industry's most far-reaching reforms since 1921 - were backed by Labour's shadow work and pensions secretary Rachel Reeves, who agree with Mr Duncan Smith that people could be trusted with their pensions.
However, there has been some criticism that pensioners may overspend early in retirement and run out of funds, or, by realising capital, be open to pay greater care home fees than they would if the money been tied up in a pension.
There have also been warnings of fraudsters offering bogus advice and investment packages.
Mr Duncan Smith said: "Why would somebody who has made all the effort over the years putting money aside, both in terms of their paying of national insurance and saving on top of that for a retirement income, why would they suddenly want to go out and just behave irresponsibly, having behaved responsibly all their lives, planning for their future, giving themselves security?
"Why do we think that the state who has arguably historically been the most profligate of all people with money, not ordinary people, but the state has misused taxpayers money for generations so why would we say that those people would actually go out and blow their money on something? No, I don't think so."
He said that the Chancellor had announced free advice for people to help them decide what to do with their pension pots.
Pensions minister Steve Webb, a Liberal Democrat, came under fire last week for suggesting that if pensioners wanted to "buy Lamborghinis" with their savings they should be able to.
The loosening up of the pension rules has been welcomed by Labour, with shadow work and pensions secretary Rachel Reeves who told Murnaghan she supported the reforms.
She said: "We are talking about people here who are coming up to retirement, who have saved all their lives, put something aside. I think we can trust these people to make sensible decisions on how they want to use their money in retirement to support them."
However, she said the Government had not gone far enough and needed to cap the fees and charges being provided by pensions providers, on average a total of £200,000 during a person's lifetime.
She said there should be a cap with providers only allowed to charge 1% in fees on the amount people were investing in their pensions each year.
There have been other significant notes of warning about Mr Osborne's pension reform, the key giveaway in Wednesday's Budget which has seen a bounce back in the polls for the Tories.
The Institute for Fiscal Studies warned in a report on Thursday: " ? without wanting to be seen as patronising, it is important to point out that increased choice could lead to more mistakes.
"People at 60 or 65 are known to underestimate their own life expectancy, and especially the likelihood of living to extreme old age. They may over spend early in retirement."
Labour MP Tom Watson cautioned: "Massive lump sums will be in the hands of individuals with all the everyday temptations and risk-taking that we all know so well. And once that money is blown, it will be the wider community that has to pay."
Mr Duncan Smith said some in the Labour party had objected to the measures because "honestly the beating heart of Labour does not trust people with their own money and that's why they're struggling over this."