Pensioners who have bought annuities will be given the option to sell them on from April 2017, the government has said.
Under new plans still being worked out, people who used their pension savings to buy an annuity and guarantee an income for life will be able to sell it through a broker. They will receive a lump sum, while the buyer of the annuity will continue to receive a guaranteed annual income under the annuity’s original terms.
The creation of a new secondary market will remove tax restrictions on the sale of annuities. It forms part of wider government plans to give pension savers more choice upon retirement. Selling on their annuity could be an option for up to 5m people. It may be particularly attractive for retirees who later regretted buying an annuity, since many offered poor value.
“Thousands of people who receive minimal income from annuities they were forced to buy will benefit from these new rules,” says Gareth Shaw of Saga Investment Services.
The Treasury said sticking with an annuity will be the right option for most people. “But there will be some who would welcome being able to draw on that money as they choose – the same freedom we gave people approaching retirement in April this year,” said Harriet Baldwin, economic secretary to the Treasury.
Originally the government planned to launch a secondary market place in April next year, but is still working on putting in place protections for consumers.
Selling an annuity will be a complex decision and critics have said it is unclear how much price transparency there will be in the new market place.
“With the option to sell their annuity, customers will need ongoing support to preserve and use their capital for the remainder of their retirement,” says Peter Bradshaw of Selectapension.