PLANS TO SELL ANNUITIES ABANDONED
The plan to allow consumers to sell annuities for a cash lump sum has been abandoned by the UK Government.
- You will now not be able to sell your pension annuity from April 2017
- Anyone who bought an annuity before the pension freedoms will not be able to change their contract
Plans to sell annuities abandoned
The March 2015 budget announced plans to allow people to sell annuities from April 2017. The Government planned to allow you to sell your guaranteed income from a pension back to the provider (or a 3rd party) in exchange for a lump sum.
The main reason behind this was that flexible pensions reforms allow you to avoid buying an annuity from your pension plan. You can now withdraw all of your pension fund, although this would attract income tax on the withdrawal.
It was initially felt that those people who had been ‘forced’ into buying an annuity prior to April 2016 were unfairly disadvantaged. Therefore, the Treasury conducted a consultation with the pensions industry.
Reasons why selling annuities was abandoned
Generally, the pensions industry was not in favour of the proposals to allow people to sell their annuities back. Various product providers said that they would not participate in the market, partly because it looked to be a complicated transaction. With limited competition available to consumers it was felt that they would not be able to obtain enough value from the transaction.
In addition, the transaction would have required specialist advice, which would have been expensive. Finally, the transition from a guaranteed income for life to a lump sum would have inevitably led to high charges from the product provider, potentially eroding value to the consumer.
Overall, the feedback was that the proposals could have led to many consumers suffering disadvantages as a result of the transactions.
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