Brits need to take more responsibility for retirement planning
Nick Scarrett, head of investment and pensions at Fair Investment Company, comments on the changes to pensions as a result of the Emergency Budget.
State Pension age increases
"Realistically, something had to be done about the state pension system in this country because currently it is simply unaffordable.
"When the contributory state pension for all was introduced in 1948, the retirement age was 65 for men and 60 for women, which is the same as it is now, but the life expectancy was 66 for men and 70 for women.
"Now, the life expectancy for men is 78 and women is 82, so we are all living 12 years longer as pensioners. This means the state is paying out a pension for men for an average of 13 years, compared to just a year when the system was launched more than 60 years ago.
"As a result, the old age dependency ratio - which measures the number of pensioners for every 1,000 people of working age reached 310 in 2008, and it is expected to be 343 in 2051, so something needs to be done.
"Raising the pension age to 65 will go some way to help close the gap between contribution and payments, but it will be interesting to see what comes out of the review in the pension system because whatever happens, the fact remains that there has to be much more onus on the individual to look after their own finances in retirement.
"People need to be better educated about the importance of having sufficient retirement planning in place. It has never been more important to look at retirement planning, and that doesn't just mean standard pensions, there are plenty of options, for example, ISAs, investment bonds, venture capital trusts and unit trusts/OEICs."
Abolition of the compulsory annuity age
"The chancellor also announced the abolishment of the compulsory annuity age, which will give pensioners more freedom to choose when or if they take their annuity and more options of what to do with their pension.
"Instead of being forced to buy an annuity at 75 and having to take the rates available at that time, pensioners are being given the choice of when and even if they want to buy an annuity with their pension fund.
"I think it is a very positive move; not only will it mean that people have more choice, but hopefully it should go some way to encouraging people to save into a pension scheme.
"However, the devil is in the detail, and it depends on what comes out of the consultation as to how much it will help pensioners. For example, how will death benefits be taxed for those over the age of 75?"