The Government has drastically scaled back how much it expects to bank from plans to let pensioners sell on their annuities.
Last week’s Budget document reveals the Treasury estimates it will receive £960m in the first two years after the launch of the secondary annuity market – due in April 2017 – before seeing £295m leave its coffers in 2019/20 and 2020/21.
The total tax benefit to the Government will be £665m as a result, £160m less than it predicted when the measure was launched in the 2015 Budget.
Tax take will decline over time as people who would have paid tax on their annuity income instead pay a lump when they sell it.
Retirement Advantage pensions technical director Andrew Tully says: “It’s clear from the Treasury’s numbers that there is huge uncertainty around take-up within the secondary annuity market. It seems clear there will be a surge of people looking to sell their annuity when the new rules are introduced in April 2017.
“However, once that initial rush is over, there are likely to be much lower numbers trying to trade their annuity on an ongoing basis. So while the Treasury may get an initial tax benefit from this policy, it is likely to only be for a couple of years.”
It is understood an FCA consultation on how the secondary market will work in practice will launch within weeks.