The government announced last month that they have dispensed with their plans to allow those who have retired to sell their pension incomes for cash. Originally announced by the former Chancellor, George Osborne, in 2015, had the proposals gone ahead they would have opened the door for around five million retirees to sell their annuities through a secondary annuity market. This would have provided welcome relief for those finding themselves held captive by low-value pension deals, some of which pay out only a few pounds each week.
Last year’s pension reforms ensured that annuities no longer had to be purchased, giving savers more freedom and choice in how they spend their pension. However, those who have already bought an annuity are unable to benefit from pension freedoms, a problem which George Osborne’s proposal for a secondary annuity market had been intended to solve.
Whilst the idea of selling on annuities was to also give a better deal to those receiving a poor income from them, concerns had been raised that a secondary annuity market might have proven tricky to negotiate, with the fees involved, leaving those hoping for a better deal actually worse off.
In their October announcement, the Treasury stated that the main reason for scrapping the idea was that too few firms had expressed an interest in buying annuities to create an effective and competitive market. As this would make it difficult to get good value for money on annuities, the Treasury felt that going ahead with the plans would have put consumers at risk.
The response to the announcement within the pensions sector has been varied. Some have expressed disappointment, as the plans no longer going ahead will mean that those with annuities will continue to be excluded from pension freedoms. Those welcoming the government’s decision, meanwhile have said that the proposals looked to be too complicated and would have offered poor value for money, so the decision to scrap them will ultimately protect pensioners from being coerced into deals which would have left them with less money overall for their retirement.