“There will be some situations where it will make sense for annuitants to sell their annuities so we see the creation of this market as an extension of the ‘pensions freedom’ agenda,” said Stephen Lowe, group communications director at Just Retirement.
“At the same time we share the FCA’s concerns about the risks of poor outcomes when people don’t understand the true value of the annuity income they are giving up. What is needed is a ‘sense check’ before anyone makes a decision and we think that Pension Wise is perfectly placed to deliver this.”
Just Retirement said there is a strong argument that those thinking of selling annuities should undergo a mandatory consultation with Pension Wise, the free and impartial guidance service available.
Pension Wise would be responsible for discharging the risk warnings and other disclosure requirements such as any requirement to take advice, the likely costs and charges involved, and the benefits of shopping around.
“This could streamline the process, for example, by ensuring risk warnings are fully and consistently disclosed up front. It would also equip them with the knowledge to judge whether to continue with the sales process and, if necessary, incur the costs of regulated advice,” he said.
“We also believe mandating guidance would provide valuable risk mitigation for some of the potential scamming activity.”
Just Retirement said allowing people to sell their annuities could be particularly helpful where they no longer need an income, want to reconfigure benefits such as to add a spouse’s pension, or to help people secure better value when offered Guaranteed Annuity Rates.
“In most cases annuities work well because retirees need a stream of income to sustain them. But that’s not always the case – circumstances do change and plans need to be changed,” said Stephen Lowe. “We see the secondary annuity market as most useful for those who can afford it because they have other income sources and who are likely to be taking advice.”
He said that the new pension freedom rules mean that Pension Wise has an important role to play in helping people make good choices when accessing their pension benefits in what has become a more sophisticated financial environment.
“
Pension Wise is the right idea to help address these complexities but this is a service that needs to be sweated a lot harder,” said Stephen Lowe. “We’ve seen a decrease in people shopping around and a rise in the number of pension scams so the need for this guidance is greater than ever.
“If Pension Wise were the default option for people accessing pension money we would see take-up rates rocket and outcomes improve. For the secondary annuity market in particular we think it ought to be mandatory so that potential sellers learn about the pros and cons from the off.”
|
