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Hargreaves rethinks role in ‘stillborn’ secondary annuity market

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Hargreaves Lansdown is reconsidering whether to play an active role in the secondary annuity market as it warns a lack of interest from investors could see the creation of a “stillborn” marketplace.

The Government is planning to allow people to sell their annuities from April 2017. Providers will be able to buy back their own annuity and customers will have to take advice above a certain, as yet undisclosed, threshold.

Several firms have expressed an interest in acting as brokers but Hargreaves Lansdown head of pensions research Tom McPhail says low supply side appetite could leave customers in an uncompetitive market.

He says: “We have seen little evidence to date of potential buyers, apart from the incumbent insurers looking to buy back existing policies.

“If other buyers don’t emerge, you will end up with one partner on the dance floor and they will have two left feet.

“We’ll have to take a view at some point on whether we are going to commit to the market, but we have to be able to construct a viable business proposition. A significant proportion of demand for the market is likely to appear at the outset but there’s a risk the market will be stillborn.”

It comes as a Hargreaves survey of 242 retirees in receipt of an annuity showed while 47 per cent found the idea of swapping an income stream for a lump sum appealing, 65 per cent would not want to take advice.

However, 75 per cent of respondents were happy to share their medical information as part of a sale and 71 per cent understood that selling their annuity could push them into a higher tax bracket.

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Comments

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

  1. “47 per cent found the idea of swapping an income stream for a lump sum appealing”.
    Appealing. I find a £12,000 hot-tub in my back garden appealing, but it would make no practical or financial sense for me and I’d never spend the money on it. And how might HL’s survey then translate to a take-up rate when it gets to the point of signing on the dotted line to give up the lifetime income guarantee? For a sum that will in all likelihood be hammered by costs and understate life expectancy?

  2. I am more than a little surprised that a firm of HLs pedigree should have taken so long to decide that this daft idea wasn’t worth a candle.
    Many iof us came to this conclusion the moment after this brainwave left ‘Orrible Osborne’s lips.

  3. We have spoken with many investors and insurers who are interested and investigating this market, so we do expect there to be sufficient buyers of the annuities and a competitive marketplace. We don’t expect public commitments until the legislative and compliance issues are finalised which is only logical.

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