Providers have welcomed the news the Government will no longer create a market for secondary annuities, saying the move would have taken pension freedoms too far.
Last night the Treasury announced it was scrapping plans to allow retirees to sell their annuities, citing a lack of buyers and insufficient consumer protection.
Many providers have backed the decision, saying the plan to introduce a secondary annuities market in April was unworkable.
Retirement Advantage pensions technical director Andrew Tully says: “This felt like a step too far in extending the pension freedoms.
“It was always going to be difficult to find a way for consumers to get good value from trading a lifetime income and ensure they were protected from a poor outcome.”
Hymans Robertson partner Douglas Anderson argues it would have been difficult for savers to get value for money from selling on their annuity.
He says: “While it’s good news for consumers, in the short-term it may not be such great news for the insurance industry which could not afford to assume a U-turn was a possibility.
“Many were busy designing new processes to cater for annuitants considering selling their annuity. Others have been taking greater steps to prepare. For example, some manufacturers and distributors of enhanced annuities were hoping to repurpose their health based underwriting models to assist with pricing.
“On balance though this news should be welcomed. Creating an open, secondary market for selling on annuities would have been no small undertaking and the risk to consumers, and by default insurers, would have been high.”
Old Mutual Wealth pensions expert Jon Greer says the market was likely to have been “fraught with danger.”
Greer says: “It was a political promise made before the practical application of the policy had been considered, but shelving the proposals so soon is a major U-turn that the Government will not have undertaken lightly.
“The new Chancellor has made the bold choice of prioritising consumer protection over a political promise from George Osborne.”
But former pension minister Ros Altmann says the move will leave many retirees disappointed.
She says: “It is a shame this aspect of the pension freedoms is being abandoned and that the overhaul of pensions guidance seems to have undermined a potentially valuable service for people who will now be stuck for life with an annuity they did not want to buy and may not be the most suitable product for their retirement needs.
“It was never going to be a huge market, but for some people it would have been a real benefit to be able to undo their annuity.”