The government has cancelled its plans to create a secondary annuity market on the grounds that sufficient consumer protections could not be balanced with the development of a competitive market.
After discussions with industry experts, financial regulators and consumer groups, government officials reached the conclusion that creating the conditions for a competitive market, with multiple buyers and sellers of annuities, could not be reconciled with sufficient consumer protections.
The government confirmed that it would not be willing to allow the creation of a market that could lead to poor outcomes for consumers, such as receiving poor value for an annuity income stream or suffering higher costs.
The government estimates that 5% of people who currently hold an annuity would have take advantage of the secondary annuity market.
The concept of a market for secondary annuities was first raised by former Chancellor George Osborne in the March 2015 Budget and confirmed in the 2015 Autumn Statement. The market would have enabled individuals to sell on their existing annuity income stream.
Simon Kirby, economic secretary to the Treasury, said: “Allowing consumers to sell on their annuity income was always dependent on balancing the creation of an effective market with making sure consumers are properly protected.
“It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited. Pursuing this policy in these circumstances would put consumers at risk; this is something I am not prepared to do.”
Douglas Anderson, partner at Hymans Robertson, said: “This is good news for consumers. While some retirees may feel a sense of disappointment as they feel trapped in a product they didn’t want to buy, in reality, getting value for money from cashing in annuities would have been a tall order. With freedom to sell came the risk of making poor decisions. There simply would not have been enough protection in place for consumers come April.”