The Government has widened the scope of its plans to let pensioners cash in their annuities to some members of defined benefit schemes.
An HMRC consultation published today reveals final salary schemes that have purchased annuities as an asset will be able to assign them to individual members who in turn can sell them on.
This includes members of schemes where trustees have purchased bulk annuities in the past.
It has previously been assumed the reforms – which will require sellers to take advice above a threshold – would not be extended beyond defined contribution schemes.
The Government predicts around 300,000 people, out of five million people being paid annuities, will opt to sell them on.
It says: “The new tax rules will permit individuals to assign or surrender annuities payable to them that were purchased in respect of money purchase or defined benefit arrangements.”
However, it will be left to trustees’ discretion to assign the annuity to individuals.
Aegon pensions director Steven Cameron says: “The paper paves the way for more individuals than previously expected to have this option.
“Often, trustees of workplace pensions arrange for an insurance company to pay the scheme pension through an annuity. Here, the annuity may still be legally owned by the scheme but HMRC will allow the trustees to make changes to offer these members the right to sell their annuity.
“This will be available to both defined contribution and final salary schemes – a significant extension on what we’d expected.”
He adds: “The tax treatment and other rules are complex and with many of those eligible being elderly or vulnerable, professional advice and balanced information will be vital.”
Retirement Advantage pensions technical director Andrew Tully says: “It is interesting that we are seeing the pension freedoms extended into DB world but it remains to be seen how many schemes will actually allow this in practice.”
The FCA and Treasury are expected to publish further consultations in the next few days.