Insurers are calling on the Government to reverse its decision to ban them from bidding to buy back their own annuities.
They say people selling their annuities will lose out unless the Government U-turns on its plan.
In th Budget Chancellor George Osborne launched a consultation on creating a secondary annuity market to allow pensioners to swap the contracts for cash or move into drawdown.
The Treasury ruled out purchases by the original annuity provider, citing the risk of insurers exploiting a “captive market” and the potential impact on insurers’ solvency.
But Legal & General managing director of individual retirement Bernie Hickman says excluding original providers will mean customers are likely to get a worse deal.
He says: “We will be pushing back on the Government on this as I don’t think deciding the provider of the annuity can’t bid is a good customer outcome.
“All things being equal, we should be able to pay slightly more than everyone else. The right outcome is to ensure you have a competitive marketplace and to do that you need to allow a person who can bid the most to do so.”
Scottish Widows head of pensions market development Ian Naismith and Standard Life head of pensions strategy Jamie Jenkins agree original providers are well placed to boost offers, particularly for small pots with fixed overheads.
But Jenkins says allowing providers to buy back annuities would mean the Government entering “new territory” by enabling insurers to rip up contracts, rather than reassigning them.
MGM Advantage pensions technical director Andrew Tully says safeguards – such as ‘blind’ bidding – would need to be introduced to ensure people selling their annuity shop around for the best prices, rather than defaulting to existing providers.