Simon Read: Lamborghinis? Pensions minister Steve Webb's gaffe shouldn't detract from transference of power
Steve Webb, the coalition's pension minister, is well-known for speaking first and then explaining what he really meant afterwards. At times he says things with an obvious twinkle in his eye simply for their shock effect.
It allows him to test theories and potential policy in public without the responsibility of having to back them up. When challenged, he responds with phrases such as: "I was just putting it out there." That may sound like a normal politician's weasel-worded get-out clause, but Mr Webb often uses the method to great effect.
As he did quite admirably this week. A chance remark on the radio got him on the front page of a downmarket tabloid. "Job done!" he probably said proudly to his team of aides.
The essence of his message, that pension pots can be used to buy Lamborghinis, is far from the stupid thing it sounds. It neatly sums up the profound change in pension planning that the Budget changes have put into effect this week.
In simple terms you will be able to decide for yourself what to do with your pension nest egg. No longer will you be forced to buy an expensive and poor-value annuity. Instead you will be allowed to use the cash in any way you like, although you will still have to pay tax on it when you take it out of your pension pot.
But warnings that the move is the death knell for annuities – Barclays reckons the market could shrink by two thirds in just 18 months, for instance – are wide of the mark.
The change actually gives insurers a challenge that they will be forced to embrace if they want to continue making fat profits. (There's no "if" about it, of course.)
Their challenge is this: to turn their expensive, poor-value products into fairly priced ones with decent payouts. If they can do that then it will be logical for older people seeking an income in retirement to make a positive choice and buy an annuity.
Read more: How to make the most of the pension revolution
Lamborghini gaffe shouldn't detract from transference of power
New pension freedom may lead to care fees problem
Robin Williamson, technical director of the Low Incomes Tax Reform Group, said: "The vastly more flexible rules for drawing down pensions without necessarily taking out an annuity should force providers to be more competitive in what they are prepared to offer pension savers."
And early reaction suggests that the insurance industry is up for the challenge. "There will be an appetite to engage with the challenge of a reformed framework, and make it work, just as providers in the market will innovate to meet the demand created by the new rules," predicted Huw Evans, deputy director general of the Association of British Insurers.
That innovation is likely to see a drift towards lifetime savings schemes, rather than specific retirement savings. And that's a concept that is much easier to grasp.
Millions are already used to stashing cash in tax-free individual savings accounts and don't feel tempted to withdraw it all and blow it in an orgy of spending. When they're given a more flexible pension, they are likely to adopt the same sensible approach, not least because leaving their cash within a pension for as long as possible will allow it to grow tax-free.
Mark Dampier: An infrastructure fund that builds returns by taking different roads
Simon Read: Timeshare owners accuse Macdonald Resorts of land grab
Donald MacInnes: Let's pretend Scotland won and now a salmon is running the country
10 tips for taking out a personal loan
Bargain Hunter: Win a new iPhone 6
- 2 Friends 20th anniversary: Alison Jackson photographs reunited cast
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 5 Free U2 album: How the most generous giveaway in music history turned into a PR disaster
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize