15th December 2015
The government has confirmed that from April 2017 annuity holders will be able to resell their guaranteed income for a lump sum.
It is estimated that there are around 5m annuity holders in the UK, receiving total income of around £13.3bn a year.
The Treasury consultation response has also confirmed that there will be an intermediary market for the benefit of investors. The option to trade an annuity will be open to those purchased in the future, not just those already in force today.
All firms operating in the secondary market to be regulated by the Financial Conduct Authority and switching to a drawdown arrangement will be permitted but selling only part of your annuity will not
Tom McPhail, head of retirement policy at Hargreaves Lansdown said: “This is welcome confirmation of a widely expected announcement, which will now give millions more pension investors greater flexibility over their retirement income. Selling a guaranteed income will not be right for many people.
“Access to market competition to secure the best price and suitable information, guidance and advice should help to ensure that ordinary investors are protected and can make the best possible use of their money.”
Andrew Tully, pensions technical director at Retirement Advantage, added: “On the face of it this sounds like great news, extending the pension freedoms to existing annuity customers is a logical step. But, and this is a big but, people might not receive the sort of cash they expect once you actually do the sums.
“While some people may find the idea attractive, those who have been sold a poor value annuity and then trade it in won’t necessarily get better value.
‘It is good to see a compulsory advice safety net being introduced to provide protection and help people from making poor decisions. It remains to be seen if advisers have the appetite to get involved in this business. The brokering service will effectively mean everyone will shop around for the best deal. It would be logical to extend this to the primary annuity market.”