Radical pensions reform is a risk for the Government

Chancellor George Osborne announced radical pension reform in today's Budget . Photo: Lynne Cameron/PA Wire

Unless you are on the brink of retiring, annuities may mean nothing to you.

But until today they have been an almost unavoidable - and very unpopular - component of your pension.

Annuities guarantee an income for life but the amount they pay out each year depends on interest rates, which have been at a record low for years ... condemning people to a much worse-off retirement than they expected.

In sweeping changes announced in the Budget today, the Chancellor has all but condemned annuities themselves.

From next month, people retiring will no longer have to buy one and can choose to take the entire sum they have saved and put it into another savings product that (one hopes) pays a better return. They will pay tax at their normal rate on that payout.

This is music to the ears of campaigners who have protested for years that the emergency treatment of low interest rates administered to the economy to encourage borrowing have hammered savers and pensioners unfairly.

Today's news is payback for this group (of voters, please note) but it's too late for those who have already bought an annuity.

It's a risk for the Government. George Osborne says he trusts pensioners to do the right thing, but they could end up spending what they've saved and then relying on the Government in old age.

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