Not so easy money: The Chancellor’s pensions offer carries big risks

The Chancellor says people who have worked hard and saved all their lives should be free to choose what they do with their money. These sentiments – expounding the rationale for allowing pensioners repeatedly to dip into their retirement savings – sound laudable. Who can argue against the old rhetoric about hard-working families?

But in fact, these proposals are extremely dangerous. It is true that most people of retirement age will either leave their pensions alone or invest them wisely. But there are many more who will not. Others will succumb to the temptation to use it to get themselves out of short-term financial fixes – credit card bills, essential property repairs, debts run up from being unemployed. Many more will think they are investing safely for the future, but are actually doing anything but.

With billions of pounds suddenly up for grabs, financial advisers and investment firms will smell major potential profits. They will flock to sell their services to this new army of customers, and not all will be scrupulous. As we have seen with PPI, interest rate swaps and, of course, the sub-prime mortgage crisis, free-for-all deregulation of the way people’s retirement savings are handled can be catastrophic.

If substantial numbers of the retired and elderly do run out of cash – if a part-privatised national insurance under a profit-motivated private sector leaves people out of pocket – who will bail them out? The same generation currently unable to afford to get on the housing ladder, struggling to pay university tuition fees and facing years of paying down the country’s £1.4 trillion net debt. The truth is, nobody enjoys saving for a rainy day. Compulsion may not win pensioners’ votes, but sometimes it’s what wider society needs.