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Cash for annuities plan tipped for Budget

Senior coalition figures are in talks to include plans for a consultation on creating a second hand annuity market in the final Budget before the general election, the FT reports.

Last month, Money Marketing revealed how the Treasury had called in senior industry figures to discuss the possibility of allowing people who have already bought an annuity to sell the contracts on for cash.

But pension experts branded the concept “crazy” and wrote it off as electioneering.

In December, pensions minister Steve Webb said millions of people with annuities should not be excluded from the pension freedoms coming into force this April.

He said: “No one would be obliged to do so, but for those who would prefer upfront capital to regular income, I can see no reason why this should not be an option.”

Webb has been keen to stress that he is not considering unwinding annuity contracts, but selling them on to institutional investors such as defined benefit pension funds and insurers.

Partnership chief executive Steve Groves says his firm would be interested in buying annuities if the regulatory treatment was favourable.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. In politics stupidity is not a handicap.
    Napoleon Bonaparte

    Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
    Groucho Marx

    One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors.
    Plato

    If you have ten thousand regulations you destroy all respect for the law.
    Winston Churchill

  2. I will concede that the idea has merits for a minority, but will be misunderstood by the majority. Either way if it is progress it needs significantly more consultation with interested parties and a longer run in period to iron out wrinkles in legislation, regulation and education than we have seen with pension freedoms and guidance.

  3. Implement in haste, repent at leisure!

    I really wonder how this is going to turn out…

  4. Can someone show me the price for an annuity sold on this second hand market that the vendor, Which?, Claims Management Companies, Relatives, the Financial Press etc etc wont believe was too low 10,15 or 20 years after the event?

    I can see it now. Annuitant aged 75 gets £1,000 per year and sells it for £10,000. 11 years later he is still around and realises he is now out of pocket. Cue call to a CMC’s that just so happened to text him suggesting he reconsider his annuity sale. Claim made to FOS, purchaser of annuity pilloried in the financial press as scamming vulnerable OAP’s.

    Any reason to suggest it wont end up like this?

  5. Call a spade... 12th March 2015 at 11:28 am

    @Nick Wardle – just what I was thinking. Since last year’s Budget we’ve heard plenty about “rip-off annuities”; if this goes ahead, it will be “rip-off annuity repurchases”. The public – and politicians – won’t understand any sort of formula used to calculate the price, so will happily assume the worst.

  6. Nobody asked for this and few think there is any merit or common sense in it. It is a persisting personal crusade by one person.
    So annuities were priced based on gilt yields and mortality assumptions and a legal contract was formed. Do we now want to release some from that contract (most likely those who realise their life expectancy may be less than average)? So, for those who remain in annuities beyond average life expectancy and whose income relied on mortality cross-subsidy, can they expect their contract to be broken too and income reduced to reflect loss of that cross-subsidy? Yes, no? Or perhaps annuity providers should plant more money-trees?

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