Osborne to set out to win the hearts of the elderly in his budget

The Chancellor will give five million pensioners with existing annuities the right to cash them in from April next year.

Mr Osborne refused to say if the budget would be fiscally neutral but insisted he had been clear that Britain must “pay its way”.

He told BBC One’s Andrew Marr Show: “No giveaways, no gimmicks. A budget for the long-term.

“Everything we do in this budget has to be paid for. That has been the central argument I’ve made all along.”

Mr Osborne said the Conservatives would set out detailed plans for balancing the books after the election.

“This country is still borrowing too much so we have to go on making difficult decisions,” he said.

The planned annuity reforms will give pensioners the same opportunity to access their retirement funds as Mr Osborne announced last year for people who had not already taken their pensions.

With just weeks to go before the election, the move is likely to be seen as an attempt to win over wavering older voters.

Mr Osborne said: “It’s all part of trusting people who have worked hard and saved hard all their lives.

“It’s all part of having a long-term economic plan where we build our country on savings and investment.”

Mr Osborne dismissed claims that pensioners could end up blowing their nest-eggs on Lamborghinis and holidays, telling Marr: “I just think that is a very patronising attitude to take towards people who have shown responsibility, saved through their lives, saved for a pension.”

“By changing the law we are trusting people who have worked hard and saved hard all their lives,” he added.

Annuities have been the focus of growing controversy in recent years amid plunging rates, and fears that many people are unaware that they could possibly get a better deal by shopping around rather than sticking with their existing pension provider.

Removing the restrictions on buying and selling existing annuities will allow pensioners to sell the income they receive from their policy without unwinding the original contract.

They will be free to either take the cash as a lump sum or place it into drawdown to use the proceeds more gradually.

Mr Osborne is expected to remove the tax charges of up to 70% that currently hit pensioners who want to sell their annuity income to a willing buyer so they are taxed only at their marginal rate.