An estimated five million annuity holders could soon have a clearer idea of how they could resell their retirement income stream for a cash lump sum in the next few days.
Hargreaves Lansdown Pensions today pointed out that the Summer Budget revealed the government will set out plans for the secondary market for annuities in the autumn, meaning these could be expected sometime in the next fortnight, before parliament breaks for recess on the 17 December.
The company suggests the Treasury could use the existing annuity broker market to create a competitive offering for those wishing to sell their fixed income stream products. By doing so, brokers could offer the annuity product to a range of potential purchasers, securing the best possible deal for the customer.
However, the pensions product provider expects annuity holders might be allowed to sell the product back to their existing provider, which, although likely to lead to a less competitive purchase price, would simplify the process, particularly for those with a smaller annuity.
“The development of this market will extend the pension freedoms to millions of retired investors who will no longer be locked into their existing contract,” said Tom McPhail, head of retirement policy at Hargreaves Lansdown.
“However it is also important to note that it will not compensate them if they bought a poor value contract to start with and some investors may find the lump sum offered to them will not be an attractive deal.”
The plans to implement measures to create a secondary market for annuities were announced in the March 2015 Budget and were originally due to be introduced in 2016. However, the launch was pushed back to 2017 in the Summer Budget.