Financial services watchdog reveals more information on the secondary market for annuities

Hayley Kirton
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The second-hand market is due to open next April (Source: Getty)

The financial services watchdog has today asked for feedback on its proposed rules on the second-hand market for annuities.

Suggestions by the Financial Conduct Authority (FCA) include requiring brokers to set out charges up front and agree them directly with the customer, rather than receiving a commission from firms acting as buyers, and to provide those considering selling their annuity with specific risks and to recommend they seek financial guidance.

"Opening up this market extends the government's pensions reforms to those who have already bought annuities, however, there are potential risks involved for consumers and we recognise that some consumers may be particularly vulnerable," said Christopher Woolard, director of strategy and competition at the FCA.

"We have set out proposed rules and guidance today that will help ensure that consumers have an appropriate degree of protection should they decide to sell their annuity income."

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The consultation into the FCA's suggested rules will run until 21 June. The second-hand market for annuities is due to be up and running by April 2017.

Some details of the secondary annuity market were revealed last December, when government confirmed that all purchasers and intermediates involved in the new market would need to be regulated by the FCA.

Plans to create a market for people to sell their unwanted annuities were announced in the 2015 Budget. The move is designed to extend the pension freedoms rules, which essentially allow people to access their pension pot without first buying an annuity, to those who had already purchased an annuity.

It is thought that some five million people could be eligible to sell their fixed retirement income stream under the rule change.