The Government has confirmed it is to launch a consultation on how to extend pensions freedoms to savers who have already purchased an annuity as part of this week’s Budget.
In a statement published yesterday, the Treasury says it aims to allow pensioners to sell on their annuities from April 2016.
The returns can then be either taken as a lump sum, or placed into drawdown.
Money Marketing first revealed last month the Treasury was considering plans to include tradeable annuities as part of the final Coalition Budget.
The Government will publish its consultation on how to establish a market for buying and selling annuities on 18 March, and has pledged to work with the FCA to introduce appropriate guidance and other consumer protection measures.
This may include extending Pension Wise to support annuity holders, although such a move would require new primary legislation.
Under the plans, selling an annuity will not unwind the contract. Instead, the provider would continue to pay the annuity payments for the lifetime of the annuity holder, but would reassign those payments to the purchaser.
The proposal will not give the annuity holder the right to sell their annuity back to their original provider, and the Government has said it is unlikely to allow the original annuity provider to purchase, and then discontinue, customer annuities.
But the Treasury says it will also seek to consult on who should buy annuity income, and says it does not consider it to be an appropriate investment for retail investors, citing the complexity and difficulty in determining a fair price.
Chancellor George Osborne says: “There are five million pensioners who are locked into annuities they have already bought. They should have the same freedoms as we have given everyone else.
“For most people, sticking with that annuity is the right thing to do. But there will be some who would welcome being able to draw on that money as they choose – the same freedom we are offering those approaching retirement in April this year.”