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Treasury holds industry talks over cash for annuities reform

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Providers are in talks with the Treasury over how to advance plans for a secondary annuities market.

The reforms, which will allow people to cash in their annuity, were due to be implemented in 2016. However, in the July Budget the deadline was pushed back to 2017 amid concerns about the impact of rushing the reforms onto savers.

Money Marketing understands an option under consideration is for the Association of British Insurers to develop a portal that would connect potential buyers and sellers of annuities and facilitate transactions. The aim is to protect consumers from unscrupulous firms looking to capitalise on the market.

Another option is for deals to be facilitated through brokers.

Hargreaves Lansdown head of pensions research Tom McPhail says: “There is a general consensus that there needs to be some form of intermediary acting between potential buyers and sellers. Whether that is a central portal, a Government-approved body similar to Nest or brokers like those in the individual annuity market is still up for grabs.

“The most logical outcome would be an open market facilitated by brokers, who would be subject to FCA checks.”

Just Retirement director Stephen Lowe says: “There needs to be strong consumer protection and a competitive market. We have been arguing for ‘authorised bureaux’, which would facilitate a blind bidding process.

“There has also been a suggestion that an organisation like the Money Advice Service could provide a reverse annuity calculation tool to give consumers a sense of whether they are getting good value.”

Retirement Advantage pensions technical director Andrew Tully says prudence would be needed with any such tool.

He says: “We would need to be careful that a tool did not give consumers unreasonable expectations.

“It has been suggested that advice could be mandated for those with annuities worth more than £30,000, as in the pension freedoms market. The difficulty is people will not know what their annuity is worth, so there needs to be a simple way of gauging that.”

An ABI spokeswoman says it is not currently developing a portal and it is “early days” for ideas on facilitating the secondary annuities market.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. This sort of scam leaves one practically speechless. If it wasn’t a Government proposition the SFO would be crawling all over it.

    I concede that for someone with a single life annuity who has a terminal illness and only months to live it might possibly be an option. But my take is that many more will just take a vastly reduced sum just to blow it on a trip to Benidorm. Then what? Joint the pension freedom takers on whatever state benefits are available? The annuity providers must be rubbing their hands in anticipation.

  2. Traded endowments any-one ?

    The way this is going, why don’t we just wipe the slate clean, give every-one who ever invested anything their money back, plus any interest that’s due, then pack up, go home, and all sit on the dole !!

    We are just inviting scams and fraudsters to have a nice warm spot in our house like a un-invited rat !

    And it clearly obvious the FCA are inept at pest control !! they see more intent/comfortable on taxing the dwellers and living off them, lets face it it is easier than crawling about the loft space or pulling back the skirting boards to deal with the real problem !

  3. “The aim is to protect consumers from unscrupulous firms looking to capitalise on the market.”

    Well we can’t have that. We must only allow people to enter the market if in doing so they screw up royally, make a massive loss and render the whole thing a disaster for themselves and their shareholders.

  4. Why doesn’t the chancellor just accept this is all a bit ill thought out, accept he opened his gob before he engaged his brain and scrap this idea. After all, its going to be pension freedoms mark 2, loads of desperate clients trying to find willing advisers (from an every dwindling pool) to help (and share liability for when the annuity proceeds are long gone and they haven’t quite died when planned).

    Any IFA looking at this will surely need his/her crystal ball back from the cleaners, G60 exam certificate at hand and PII provider on side, because its going to be for most, the equivalent of a final salary transfer and we all know how much we love that sort of work.

  5. If this drifts much beyond 2017, then politicians will starting to look to the next election.

    With the EU referendum already scheduled for that year, drift seems fairly likely.

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