Government shelves annuity re-selling pension plans

The government has abandoned plans to allow pensioners to generate money by selling their annuities to insurance firms.

The proposal was first introduced in the March 2015 Budget by the former Chancellor George Osborne, as part of wider proposals on ‘pension freedoms’.

The government has instead advised that most people would be best to retain their current annuities.

The Economic Secretary to the Treasury, Simon Kirby, 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 that I am not prepared to do.”

When the plans were originally announced critics warned that the majority of pensioners who sold annuities would receive a poor deal. They explained that insurance firms willing to buy second-hand annuities, and brokers willing to arrange the deals, would charge for their services, eroding the value of the annuity sale.

The Financial Conduct Authority also said that the annuities were ‘inherently difficult for consumers to value, and consumers who will be able to participate in this market will include a higher proportion of older, more vulnerable consumers.’

Tom McPhail, of Hargreaves Lansdown, one of the UK's biggest annuity brokers, said the government's decision was right. After extensive research, at the beginning of September [we] announced that we would not be participating in the secondary annuity market.

"The risks to the vast majority of annuity holders outweigh the benefits for the small minority who could benefit."