Pension providers are divided over the timeline for introducing a secondary market for annuities.
Last week, the ABI called on the Government to learn from the roll out of the pension freedoms and slow down the process towards introducing a secondary annuity market.
It says a number of issues need clarifying and warns the Treasury should “not rush towards” the proposed April 2016 start date when people will be able to sell on their annuities.
As part of its submission to the Government’s consultation, which closed on 8 June, the trade body says it supports the reforms in principle but “urges for the consultation not to be rushed”.
It says clarity is needed around issues such as whether providers will be allowed, but not compelled, to buy back their own annuities and how dependents and beneficiaries will be protected.
Aegon regulatory strategy director Steven Cameron and Fidelity Worldwide Investment retirement director Alan Higham agree.
Higham says introducing the freedoms should be the priority.
He says: “It is right that plans in this area should be put on hold until solutions to the issues are found. It is wrong to build up people’s expectations only to dash them later.
“There are considerable practical difficulties to overcome to establish an orderly market. The impact on healthcare of asking GPs for medical information every time someone wants to consider selling an annuity for example.”
Aegon regulatory strategy director Steven Cameron says the deadline could be met, but only if the Government itself steps in to perform key roles.
He says: “There are lots of challenges here and having another year to address those would certainly lead to a greater likelihood a market can be introduced to consumers safely from day one.
“If there was a Government willingness to play that role, for example providing a central notification of death facility, then I think it’s feasible to make the market safe by next April. However, if the Government isn’t prepared to be involved it becomes increasingly unlikely.”
But Hargreaves Lansdown head of pension research Tom McPhail says the Government’s track record means it is unlikely to slow down the pace of reform.
He says: “The critical test is do they have the necessary measures in place to use competition to drive a good price for the customers and adequate sense check mechanism for customers to assess whether they are getting a good deal? If you can satisfy those criteria it’s legitimate for the Government to press ahead with 2016.”
Legal and General managing director of individual retirement Bernie Hickman adds: “There is a lot of important detail to get sorted out to ensure customers are appropriately protected and the market works effectively. However, provided these details can be finalised by the end of 2015, we don’t see why customers should have to wait beyond April 2016.
“Timing is particularly relevant for customers with guaranteed annuity rate options who would like to access some of their pension savings as a cash lump sum. The introduction of the secondary market would allow them to benefit from the guaranteed rates and access some of their pension savings as cash.”
Earlier this month, Money Marketing revealed how the Government plans to reverse its initial decision to block providers from buying back their own annuities and introduce a ‘blind bidding’ process delivered by central exchanges.
Steven Robinson, director, Clarke Robinson
It’s an accident waiting to happen. Someone will cash in their annuity, understand they’ve got no income and make a claim against an adviser in the future. April 2016 is putting providers under pressure, but then they don’t have to do it.
I’d be very surprised if there are many advisers rushing to do the work on it, there are too many things happening at the moment for there to be enough capacity.