Government U-turn on Secondary Annuity MarketDec 19th, 2016
In the 2015 Budget, the Chancellor announced plans to extend pension freedoms to around five million people who had already bought an annuity with their pension pots.
The government proposed that, from April 2017, the restrictions on buying and selling existing annuities would be removed, allowing pensioners to exchange their future income stream for a lump sum, without unwinding the original annuity contract. Pensioners would then have had the freedom to use the lump sum as they wished, just as retirees can do so under the pension freedoms announced in the 2014 Budget.
Doubt had been cast over the scheme earlier this year following a number of insurance companies indicating their reluctance to participate in a secondary annuity market and general concern from industry bodies regarding consumer protection. The proposition was possibly flawed from the outset with the Chancellor’s initial announcement acknowledging that “For most people, sticking with that annuity is the right thing to do”.
On the 18th October 2016, the government announced that it had cancelled plans to create a market for secondary annuities stating “After an extensive programme of engagement with industry, financial regulators and consumer groups, the government has decided not to take forward plans to introduce a secondary annuities market because the consumer protections required could undermine the market’s development”.
The full announcement can be read at: