Up to 650,000 people on benefits may be barred from selling their pensions under the Government’s plans.
The Government published a consultation today outlining proposals that would allow “five million people” to sell their annuities to a third party.
But it says: “In order to protect the taxpayer, the Government does not intend to compensate individuals through welfare for any loss of income resulting from assigning their annuity to a third party, and would therefore like to consider whether those receiving means-tested benefits should be able to do so.”
According to figures cited in the consultation, around 13 per cent of annuities are paid out to people receiving means-tested benefits, mainly pension credit and housing benefit.
MGM Advantage pensions technical director Andrew Tully says: “A large proportion of those who will be interested in selling their annuity will be lower income people with small annuity payments.
“This would disenfranchise a significant proportion of the people the Government is aiming this policy at.”
Just Retirement director Stephen Lowe says: “The inverse needs clarity too. What happens to the customer who spends their pension cash after trading in their annuity? Will they still be eligible for state benefits?
“Surely the rules will need to apply equally to those people using their pension freedoms from 6 April whether they are trading an existing annuity or accessing their pension savings for the first time?”