A new set of toys

He might not be the most popular chancellor we've ever had, but I can assure you that George Osborne will be one of our most long-remembered.

It is perhaps too soon to judge the merit or otherwise the extent of his achievements, but what we can say is that under his watch, the government has introduced the most radical changes to pensions in almost a century, and unlike a lot of pensions rule changes in previous decades, this new approach isn't just an issue for compliance departments; we are witnessing a fundamental reorienting of the role that pensions play in our society. The philosophical and political ideology underpinning pension rules in the UK for the past century has focused on their function to provide a degree of certainty (a safety net) in our old age in the form of regular income.

From April 2015 pension savers aged at least 55 will have total control over how they take funds from their pension. They can choose to:

• take their entire pension fund as cash in one go;

• take smaller lump sums as and when they choose to; and

• take regular income either via income drawdown (where they draw directly from the pension fund) or via an annuity (where they receive a secure income for the rest of their life).

There has been much hyperbole and hand-gnawing in the press about the consequences of the new rules. Depending on where you sit, they are either liberating and empowering, or irresponsible and short-sighted.

Labour has said that scrapping the requirement to take out an annuity altogether was a potentially "reckless and irresponsible" move, which could "leave people running out of money".

It has been countered by members of the coalition members who say that just because you can do something, doesn't mean that you should or will do it. Notably Steve Webb, the pensions minister, argued that the people affected by the changes were "the opposite of irresponsible" as they had already saved hard to build up a pension. And as if to put our money where his mouth is, he has announced that the Department of Work and Pensions are drawing up plans to extend the new 'freedoms' to individuals who have already retired, by allowing them to sell the annuities they had been required to buy under the old rules.

So, what are pension savers to make of all this? And how can we, as advisers, assist them over and beyond our knowledge of the rules?

I argue that from a financial planning perspective, nothing has really changed. We just have some different tools at our disposal now. The key objective for most individuals remains the same; living the life they want without out-living the money. If anything, in my experience, too many people pay too little attention to their life expectancy and their longer term spending requirements, and this has been in no small part due to the fact that they didn't see the need to think too hard about it. Huge decisions about the shape and timing of their pension benefits were taken out of their hands by the old rules, engendering a level of apathy and discontent with saving in general.