article: From April 2015 millions of people reaching retirement age will be able to spend their pension pot in any way they want. In effect, the move will remove the requirement on many people with defined contribution pensions to buy an annuity, a financial product that guarantees an income for the rest of your life. The government says that the overhaul will give retirees more flexibility to do what they want with their pension savings, but Labour says this policy has the potential to be "reckless". So what are the potential hidden consequences? This scenario has been much discussed immediately after the chancellor's Budget speech, but George Osborne says that new pensioners can be trusted to organise their own finances. Some people might decide that their pension pot, locked up during their working life, will provide a nice lump sum to use to celebrate retirement with a holiday of a lifetime, a massive party, or - as the pension minister admitted - a Lamborghini sports car. But it will be clear to all that in doing so, they take away the option of using those savings when money is tight in retirement, especially if they underestimate how long they will live for. The new flat-rate state pension will provide just over £7,000 a year of income to fall back on - described by the chancellor as "generous", but much lower than the vast majority of people are used to during their working life. At times, individuals will receive this years after they have access to their defined contribution pension pot. In Australia, where people are already able to withdraw lump sums easily, recent evidence suggests that most retirees invest the money or use it to clear debts, but a few choose to buy holidays or cars. Freed of the need to put their pension savings into an annuity, new pensioners may decide to use the money to invest in property instead. Mark Giddens, partner of accountancy firm UHY Hacker Young, says: "With pensioners no longer being railroaded into investing in annuities, they will be looking for other higher-yielding investments - that inevitably means a huge boost to buy-to-let investments. "Unfortunately, it is often the case that the higher the yield, the higher the risk." There is also one other big hole in this theory. The City watchdog's recent review of annuities found that the average pension pot was only £17,700. That is hardly enough for a deposit, let alone a house or flat. Anyone who decides to take all their money in one go will not escape the taxman. Most computers will open PDF documents automatically, but you may need Adobe Reader Download the reader here "This [plan] gives people the key to unlock their pensions and take money out, but they must remember that there are tax implications," says Anne Redston, professor of law at King's College, London. Put simply, the money will be categorised as income, and so will be subject to income tax. Anyone taking out a large amount in one go might find 40% income tax is levied on
summary: A huge change in the way people fund their retirement is expected following the chancellor's "pension revolution".