Retirees ‘free to buy Lamborghini’ as UK eases pension norms

As the UK liberalised its pension rules in its annual budget, pensions minister Steve Webb said today that people receiving pensions should be free to buy ''a Lamborghini'' with their life savings if they so choose – defying the Labour Party and economists who warned that the reforms could lead to retired people squandering their money.

Webb said that he is "relaxed" about how pensioners choose to spend their money when they retire.

Chancellor of the Exchequer George Osborne, in his recent Budget, announced the scrapping of rules that force most Britons to use their pension savings to buy an annuity.

The new measure will make it much easier and cheaper for people to withdraw money directly from their pension pots. However, critics have implied that  people could not be trusted with their money and may end up struggling financially if they spend all their money soon after retiring.

Webb, a Liberal Democrat, said that the government's state pension means that elderly people will always have a safety net even if they spend the majority of their savings.

"One of the reasons we can be more relaxed about how people use their own money, and as a Liberal Democrat I want to give people those sorts of freedoms, is that with the state pension coming in, the state pension takes people above those sorts of means tests. So actually, if people do get a Lamborghini, and end up on the state pension, the state is much less concerned about that, and it is their choice," Webb said.

"The main thing we're doing is giving people new choices," he added.

Ed Balls, the shadow chancellor, warned that pensioners could end up making the "wrong choices" because of Osborne's reforms.

"There is a reason why there's been an expectation you would buy an annuity in our country if you've saved tax advantage in a pension - that's been there for 80 or 90 years," Balls told the BBC.

"The question will be - will there be proper protections and proper financial education so people don't make the wrong choices and end up running out of their pension pot well before their retirement ends.

"And secondly, will it become a way in which people can save substantial amounts of money tax-advantaged, take it out at retirement and then use the money essentially to avoid tax after that."