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Budget 2015: 650,000 people on benefits could be blocked from selling their annuities

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?”

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Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. So pension freedom for the wealthy only then. Same old story !

  2. There are enough devils and enough details in this completely pointless waste of time to keep Old Harry’s accounting department running from here to the end of eternity.

  3. Seriously, has all this been thought out? Barring the poor because they’re poor and on benefits. Dear me only in the UK.

  4. @jinker sadly this was always the flaw in the pension freedom plan in that poor people, particularly those in rented accommodation can cash in the pension fund(or annuity now), invest in a motor home and/or Mercedes and/or expensive holiday which does not count for means testing purposes then live off of the state ie the rest of us. Osborne is either inept for not noticing or an old style look after our mates and roger the poor Tory. Either way this is not right.

  5. The trouble with reinventing the wheel, is that unintended consequneces always arise. Flexible Drawdown with a minimum income requirement at least addressed the ” you can’t squander everything then fall on the state” approach. It would perhaps, have been better to simply tinker with the minimum income levels rather than chuck baby, bathwater, soap and mum out of the 18th story window.

    Still I suppose rather like PPI mis-selling compo – the resulting surge of bunga being splashed around will all help the illusion that the economy is going great guns and give the next incumbents of numbers 10 & 11 a boost. Seems it’s not just dense clients that aren’t bothered about the long term consequences.

  6. Of can worms… re-arrange the words.

  7. Before getting ‘excited’ about all this news, let’s wait and see how much companies are willing to buy back annuities for. If they do not pay much which Adviser would recommend someone with an annuity sells it. Remember we are the advisers, the clients pay for our advice (as long as you are not just a Product Seller!), which Adviser would advise that the client sells a guaranteed income? There will be the odd case where it will make sense but I would guess it will be a very few. Just like Pension Freedoms, Advisers will not recommend someone spends all their money and have nothing left to live on. If the Adviser does then they deserve to be sued later down the line when the client has nothing left.

  8. It will, of course, be quite simple.

    The adviser who missold this hair-brained plan will be to blame. If not the one that sold the buyout, the one who sold the original pension plan.

    And if they are not around any more the FSCS will make everybody else pay.

  9. Headline in 2017….

    “FSCS hits pension advisers with £20m (and the rest!) interim levy for Pension Freedom miss-selling”

  10. @PT – exactly!

  11. Before getting ‘excited’ about all this news, let’s wait and see how much companies are willing to buy back annuities for. If they do not pay much which Adviser would recommend someone with an annuity sells it. Remember we are the advisers, the clients pay for our advice (as long as you are not just a Product Seller!), which Adviser would advise that the client sells a guaranteed income? There will be the odd case where it will make sense but I would guess it will be a very few. Just like Pension Freedoms, Advisers will not recommend someone spends all their money and have nothing left to live on. If the Adviser does then they deserve to be sued later down the line when the client has nothing left.

  12. David Stoddart | 19 March 2015 12:22 pm

    “Advisers will not recommend someone spends all their money and have nothing left to live on. If the Adviser does then they deserve to be sued later down the line when the client has nothing left.”

    But that is the crux of the matter is it not? This is precisely what Chancellor George Osborne says they should be able to do if they want. After all they’ve saved into their pension for however many years so they should be responsible enough to take the action they want with their pension. But hang on are you suggesting there might be clients that want their all the money (Insistent clients even?) and will spend it as they see fit? (Waste it even?) But of course in this great new world we currently live in it’s not their fault it will be someone else’s, and do you think they should be able to sue an IFA who facilitated the pension fund release even after warning them it wasn’t good advice? Because that’s what is going to happen here with the likes of insistent clients. Gorgeous George will be long gone by then and those who are left will being paying more levies than income.
    This is all a barking mess…..!!!

  13. I would consider myself to be above average intelligence, and I cannot work out how I would even begin to give advice on this subject. I will steer clear thank you.

  14. Geoff Sharpe | 19 March 2015 7:06 pm

    In 99.9% out of 100 cases the advise will probably be don’t do it. However, when did the average man in the street start taking advice? Don’t smoke, don’t eat to much sugar, don’t drink too much, don’t use the money set aside for your retirement. I’ve already had clients contact me to release their funds to pay off debts.
    They just expect to ring their provider and the world’s their oyster, and George Osborne says; that’s how it should be……. The UK never had it so good.

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