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MPs call for secondary annuities market rethink

People in front of a bright keyhole openingA group of MPs is calling on the government to bring in legislation that would allow five million pensioners to partially sell annuities purchased before pension freedoms were introduced.

The “Your Pension, Your Choice” campaign has been launched to urge the government to allow all retirees to have the same pension freedoms.

Since the introduction of pension freedoms in April 2015, savers have cashed in £9.2bn from their pension pots.

However, the campaign focuses on those who retired before April 2015, saying the  government has denied those people pension freedoms and reportedly has “no plans to review this decision”.

The campaign says five million pensioners are stuck with annuities, and with limited access to their pension pots.

The campaign aims to encourage policy change, and a Change.org petition has started to gather public support.

A cross-party group of MPs, led by Conservative MP Paul Masterton, has launched an early day motion in parliament.

The early day motion says: “[This House…] notes that the government proposed in March 2015 to extend pensions freedoms to existing annuity holders, by introducing a secondary market for commutation to be introduced in 2017; acknowledges that in October 2016 the government announced it would no longer be proceeding with this policy.

“[This House…] regrets the government’s statement that there are currently no plans to change policy to level the playing field; recognises that retirees may need to access funds from their annuity in times of need; and calls on the government to legislate to allow five million retirees to safely partially sell their annuity.”

The government scrapped plans to create a second hand annuities market in October 2016 saying the consumer protections required could “undermine the market’s development”.

Due to current policy, Masterton says that many of the retirees are “stuck with very small, poor value annuities” that provide “no meaningful benefit”.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. William Burrows 25th July 2018 at 1:19 pm

    Why?

    I thought the arguments against a secondary annuity market were overwhelming

    But what do I know about annuities!

    • Neil Liversidge 26th July 2018 at 9:18 am

      You know more than anyone I know, William, and your views are always good to hear. I’ve contacted Paul Masterson direct to suggest he tries talking to people like you first before he sets up another disaster.

  2. Neil Liversidge 25th July 2018 at 2:09 pm

    It was dropped because it was a lousy idea. The feckless will sell their income, blow the lump sum and then expect to fall back on the state. Uncaring husbands will sell the income their future widows would have relied on. Some elderly people will be pressured to sell by their greedy kids wanting an early inheritance. The values paid will be lousy and only mugs will go for it. On the buy side of the deal will be rapacious private equity outfits such as were behind the worst of the SARB deals. The proposals were discussed last time by APFA’s council maybe 3 years ago and there was zero – absolutely zero – enthusiasm for it from any member in the room. Nobody, large or small firm, network, national IFA or other affiliated entity supported it. Why? Because we know it will end up as another mis-selling disaster with FSCS claims being financed by the sort of firms – like ours – that would not touch this kind of junk with a barge pole. Great. Bring it in. Just so long as MPs personally fund the FSCS claims that result.

  3. So here’s how it goes…

    Come up with a catchy slogan…. “Your Pension, Your Choice”

    Convince people they’ve been mistreated “the government has denied those people pension freedoms”

    Ignore the practicalities (limited advice market, cost to providers, cost to consumer (i.e. a second raft of costs incurred to get back to ‘square one’), converting risk free income to a risk environment and the likelihood they’ll be very disappointed with the capital sum offered).

    I said this when this was under consideration before – this is even higher risk than a DB a transfer given that the annuity income is in payment whereas DB is a future promise and look at the current issues the DB advice market is facing.

  4. Julian Stevens 25th July 2018 at 3:19 pm

    Is the fact that, since April 2015, savers have cashed in £9.2bn worth of pension funds supposed to support this campaign for people to be able cash out their existing annuity as well?

    We’ll probably never know how many of those who’ve cashed out their pension funds are now bitterly regretting it and I bet these MP’s don’t either. It seems (to me) stupid to allow people to cash out a guaranteed-for-life annuity and quite possibly have to pay tax at a higher rate on the lump sum that they would on the income. Have they thought of that?

  5. This is a campaign driven by an American company who would then potentially profit from the emergence of a secondary annuity market. Whilst a secondary market may appear “fair” but there are a multitude of reasons why such a market might lead to adverse outcomes for those seeking to undo their annuity purchase.

  6. Christopher Pitt 25th July 2018 at 6:28 pm

    In principle this sounds like a simple case of treating people fairly. That is until you think it through and calculate some numbers and realise that very few people would be better off cashing in an annuity. And, of course some (many?) annuitants might cash in and regret their decision very soon after.

    If MP’s want to do something constructive around pensions then why don’t the push to get the Pensions Dashboard up and running sooner rather than later?

  7. He is an idea !

    Give all the people all of their money back irrespective of annuity, pension, investment and savings, we can all turn the light off and shut up shop ! (no-one listens to us anyway), the bureaucrats know best, the FCA will set a minimum bank rate everyone is happy….

  8. So an annuity was suitable in the past rather than drawdown (there has been an element of freedom on how you took pension benefits for a long time) but suddenly it isn’t?

    This would have such potential for miss-selling claims in the future it is frightening.

  9. It goes like this….MPs’ get enough votes to debate it, go to parliament, claim expenses to attend the debate(s); parliament decide to set up a working party to look into it, MPs’ head it up and who knows, maybe they get a cabinet job or senior post as a result.

    Outcome for the pensions market and consumers? Nothing changes, because the figures don’t stack up when they finally decide the train has run as far and for as long as it can and they need to crunch the numbers and ask the real experts!! Politicians hey?

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