I never usually write about the budget.

There is usually loads of pretty good summaries provided by media outlets and some of my fellow professionals I’ve always felt another ‘budget’ summary or my perspective on the budget (usually if you’ve read one you’ve read them all!), unless I had something particularly unique or interest just added to ‘the noise’

Financial ‘noise’ is always relatively loud, from the mainstream press to the specialist trade magazines our financial planning types like to read, it’s usually at a 7/8 on the volume scale..

..but around Budget time, and in true ‘spinal tap’ style, it’s turned up to 11!

To be fair a lot of the ‘noise’ around the budget (if you ignore the speculation around the chancellors motivations, the political posturing and the constant good see/bad saw of media commentary) is pretty good stuff.

Changes in the budget have an effect on all of our lives so being aware of the changes, and more importantly how it’s going to impact the money in our pockets, bank accounts, savings, investments and pensions is something I believe it’s important to be aware of.

However usually I feel that there’s enough good guidance out there for any of our clients, regular readers and professional connections to have access to high quality budget information that we’ve previously decided another summary didn’t add enough value..

..however yesterday the game changed budget wise!

Historically, you worked hard, built up a decent pension pot and came to hang up your hat and enjoy retirement to find that your options you had to release the money you’d accumulated were severely restricted.

This meant that you either had to purchase (and be tied into) an “Income for Life” via an annuity or explore other options which provided with slightly more flexibility in retirement but still had limits designed to restrict withdrawals to a level which meant that your money would last a decent period of time before running out.

The way this market has developed, and one the reasons these restrictions are in place were to protect us from us!

The ‘worst case’ assumption always seemed to be that if the restrictions weren’t in place we’d have a huge spend up and live penniless for the rest of our lives

However now it seems to have been decided that as of April next year we don’t need to be protected from ourselves anymore. As the chancellor said, in an act of political rhetoric and obvious electioneering so blatant it would have made Tony Blair blush…

“People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances.

And that’s precisely what we will now do. Trust the people.”

So people have easier and more flexible access to their money. The government is becoming less paternalistic when it comes to our pension pots and we in our infinite wisdom decide what to do with how hard earned money.

That’s all good stuff, right?

erm, yes and no.

Having the freedom of choice is great. Being able to use your accumulated wealth to fund the life you desire and the flexibility to be more nuanced in your plans to really ensure your money meets your lifestyle is a good thing.

We all know that the nature of retirement is changing fundamentally. Having a retirement arrangement which is designed to be as flexible to reflect the way we now work in our later years makes sense.

However there are a few reasons why these proposals could be dangerous. To illustrate this I want you to ask yourself the following questions…

“What would be the first thing you’d do if you won a million pounds?”

“and the second?”

“and the third?”

If you’re like most people the answer might have been “Give up work” or “Take a world cruise” or “Buy a new Car” or “Move into a bigger house” or “Pay my mortgage off” or a combination of these things.

So it’s likely, if your like most people that your thoughts were immediately drawn to how you’re going to spend this new found wealth.

It’s really unlikely that anywhere within your top three the answer to the question was…

“To work out how that money can last me for as long as possible”

and this is the issue.

In a world where humans were entirely rational complete flexibility on all of the retirement income accumulated would work.

However we live in a world where although we all have the ability to tap into the rational side of our brains, often we don’t, and that includes me.

Many of us as soon as we think about a relatively large sum of money think about how we’re going to spend it. This means that the million pound is mentally spent quicker than you can say “where did that million pound go?”

The danger is that we fall into the same mental trap with our pensions and instead of remembering that the pot of money needs to last a long time we have the entire amount “mentally spent”

So, it it a good budget for those approaching retirement over the course of the next year due to the increased flexibility?

The answer is it depends!

Whilst you’ll have more flexibility to do what you want with your money there’s some value in having a guiding hand to help you ask questions of yourself and make more rational decisions.

That ‘guiding hand’ might be a financially savvy friend, your partner or you might choose to work with a financial planner who can help you understand the best way to use the flexibility combined with keeping you on track so the money you’ve worked so hard to accumulate lasts as long as possible.

By doing this you can benefit from the flexibility without sacrificing your longer term wealth.

As ever I look forward to hearing your thoughts?