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George Osborne's pension reforms based on 'highly uncertain assumptions'

The pension reforms announced in the Budget yesterday are a risk and based on "highly uncertain assumptions", according to an influential think tank.

Chancellor George Osborne's pension changes are being scrutinised today and the Institute of Fiscal Studies has warned that removing the need for annuities could lead to a market failure.

George Osborne was concentrating on housing today but his pension reform is being scrutinised. Credit: ITV News

[The pension reforms will] clearly provide people with a lot more flexibility and freedom, there are some risks involved, we don't know what will happen to the annuity market.

There may be some people who make the wrong decisions but that's always an issue.

If you give people freedom, you give them the freedom to get things wrong as well.

– Paul Johnson, Institute for Fiscal Studies

The first annuity was issued in Britain just over 300 years ago and pension providers have always been able to rely on the fact that people have had to swap their pension pot for a guaranteed income for life.

However, that is all about to change after the Government's announcement.

The boss of Partnership, one of the largest annuity providers in Britain, has warned that the changes have had mixed success in other parts of the world.

Steve Groves, Partnership chief executive, talking to ITV News. Credit: ITV News

The most obvious stat is the US and the data points to about 35% of people run out before they die.

But, I don't think that's a huge surprise, in reality, if you say 50% of people are going to live longer than expected that's the complexity of what people are managing.

– Steve Groves, Partnership chief executive

The Government has also started enrolling Britons in company pension schemes in a bid to ensure that people save enough money for retirement.

At Argos, nine in 10 employees have opted to stay in the company scheme but one employee was uncertain if she would spend her pension wisely, she told ITV News:

Sophie said she probably would not spend her pension pot wisely. Credit: ITV News

I can't speak for 65-year-old Sophie but 24-year-old Sophie? No, I wouldn't.

If they're going to do this, they're going to have to start educating us and educating us early so when we get to that point in our life, we can make an informed decision on what we want to do with our money.

The Chancellor said the changes are about trusting people to manage their own finances in retirement.

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