From Ford Model T to Lamborghini

It’s nearly six months since Steve Webb made his controversial Lamborghini comment - that people should be able to use their pension savings to buy a Lamborghini if they want to. 

And it was the extent of the pension changes announced by George Osborne at that time that took us all by surprise. But six months on, with a lot of reflection, and considerable hard work from the pensions industry, we’re getting used to the idea, the flexibility. And to some extent, the increased simplicity and reasonableness of the changes. Annuities will still exist, but gone is the need for an annuity and with it, the effect of the fluctuations in annuity rates from month to month that created a lottery for the approaching retiree.

In its place is a need to communicate like never before. The trustees need to decide how to respond to changes that affect their plans (the Taxation of Pensions Bill is just out). And then they need to act. Members will need that oft-spoken of information that Steve Webb speaks of like never before.

We’ve come a long way from a prescribed defined benefit pension plan (the Ford Model T of pensions) to the Lamborghini type choice that awaits today’s pensioners. I think that’s good. But trustees need to start reviewing the changes early, and then to shout loud those changes to a workforce that still has a mental block the moment you mention the word ‘pension’.