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Govt eyes provider buyback in cash for annuities talks

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The Government is holding high-level industry talks on creating a secondary annuity market and is planning to allow ceding providers to buy back their own annuities.

Money Marketing understands providers have recently been attending workshops with the Treasury as the Government seeks to iron out details on plans to allow policyholders to sell their annuity.

The Government launched its consultation on the reforms as part of the March Budget, which closes next week.

But insiders say the plans are already a “done deal”, despite some providers’ concerns that fundamental flaws remain unsolved.

The Government is also understood to be reconsidering its decision to exclude ceding providers from participating and is weighing up creating a “blind bidding” process.

Under the original proposals ceding providers were to be blocked from buying back their own annuities.

The Government said providers could come under pressure to sell annuity-backing assets and warned customers might mistakenly believe they could only sell their annuity to their existing provider.

But annuity providers said people would get worse rates if they were barred from the market.

In the Government’s consultation it hinted the £30,000 advice threshold for defined benefit transfers could be applied to annuity reselling.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. “allow ceding providers to buy back their own annuities”.

    1.At what price?
    2. Who will then buy?
    3. Will the second hand annuity be re-underwritten on the new purchases life? If so what is the incentive? Will it be classified as a PLA with a Capital Content?

    • It will be an auction, open to licensed purchasers only (life companies). If the ceding provider wins the auction and buys back the annuity, the liability is extinguished and the annuity payments stop. If another company wins the auction (and the annuitant accepts the surrender value), the annuity liability remains with the original provider, and payments continue (still contingent on the life of the original annuitant) but assigned to the winning bidder.

  2. They never know when to stop reloading do they, these insurers? I reckon that out of L&Gs £10 bil book of IAs, I can win a bil out of them in client compo, and the brilliant thing is the insurers are doing all the evidential valuation work for me. Find punter, get sale quote from firm I’m actually going to sue, file claim. It really is going to be that simple.

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