18 million pensioners gain access to retirement lump sums

Sweeping changes to the way that pensions are managed will allow millions of pensioners around the country to take their money out well after they have retired and spend it as they wish.

Under current rules, retirees can opt to take a tax-free lump sum of up to 25 per cent when the stop working, but will be taxed if they try to withdraw any more than that.

But under changes being planned in the Treasury, tax breaks will be made available to pensioners who would like to take out further lump sums to meet sudden needs such as large bills for long-term care.

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The government says the new plans will allow pensioners to spend their money how they wish, and will ensure that financial firms tailor their pension products to the needs of individuals: "The reforms to the tax rules are about encouraging innovation and ensuring consumers have the widest possible choice in how they secure their economic future", Treasury insiders told The Guardian.

The scheme was first proposed in the March Budget, when pensions minister Steve Webb controversially said that people should be "free to blow their pensions on buying a Lamborghini" if they wanted to, the Daily Mail reports.

Pensions expert Ros Altmann told the Daily Mail that in her view the changes would "give consumers more choice and more control".

She added: "For the first time pension savers will be free to choose what to do with their retirement funds. The decision that guidance must be impartial and separate from the industry is a real game changer".

But other experts fear the plans will lead some pensioners to spend their savings more swiftly, leaving them more dependent on the state later in life.

George Osborne disagrees, arguing that most savers will make sensible decisions about how they spend their money: "People who saved their whole lives, saved for a pension, these are responsible people," the Chancellor said. "It is their money. They can do what they want."