There has been much focus and comment regarding the Chancellor’s retirement revolution but less on the potential to influence a positive savings culture in general.
Welcomed by the general public and commentators alike, the Budget could also be viewed as a major stroke of political genius, given the potential short and long-term rewards for the Government.
Providing greater freedom and choice for consumers at retirement is a positive step forward despite the risk of potential unintended consequences.
The view that many of the 400,000 or so people retiring after 2015 will simply drawdown their hard earned pension pot to buy a Lamborghini is frankly ridiculous, if for no other reason that they only manufacture around 1,700 cars a year.
In all seriousness, the likelihood that the majority will ignore the need to generate income throughout their retirement is reactionary. A greater focus may lead to increased contributions and future generations should also be more disposed to save for their future too. After all, if they really want a Lamborghini, they will need a sizeable pension pot.
We should not underestimate that this marks a milestone on the road to changing public attitudes towards savings in general. The accompanying increase in the Isa allowance was also very welcome.
According to OECD data for 2012, the UK has one of the lowest savings ratios amongst the leading developed nations. France tops the table with 15.8 per cent. We sit in 13th place on 5.4 per cent, just .2 per cent ahead of the Slovak Republic.
Past governments allowed the savings culture to be replaced by one of borrow/spend. And increased regulation made it significantly tougher to save.
At last we are seeing Government intervention that could begin to reverse that trend, helping to rebuild consumer confidence in the personal financial sector and elevating the value and importance of professional advice.
Keith Richards is chief executive at the Personal Finance Society