Portal Financial conducted a survey of 1,000 respondents earlier this month and found that the main reason people would want to sell their annuity is if the income it currently generates is too small. Portal Financial believes that these are in fact the very people likely to get the worst deal due to the fixed costs involved.
Any company looking to purchase an annuity will have their own overheads to consider, such as an in-depth medical check (for both partners if a joint annuity). They also need to make a profit themselves, on top of that being made by the original annuity provider.
The impact of this is likely to be significant as they are effectively 'lending' over a long term.
What is the minimum fraction of its real value that you would accept for your annuity if you were to sell it?*
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66% of people surveyed said: “I'd want 90% or more”
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13.5% said “I’d want 80%”
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6.2% said “I’d want 70%”
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3.5% said “I’d want 60%”
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11% said “I’d want 50% or less”
What reasons would you consider selling your annuity?*
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50% of people surveyed said: “If my annuity was too small”
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22% said: “If I could use it for a significant purchase”
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15% said: “If I could switch to an income drawdown policy”
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9% said: “If I could use it to pass to my dependents”
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3% said: “Other”
*Source: Survey, March 2015: Portal Financial
Jamie Smith-Thompson, managing director of Portal Financial, said:
"Anyone expecting to receive at least 90% of an annuity's true value if they sell it has unrealistic expectations. We would expect the likely figure to be between 60% and 70% as a maximum, but it could be significantly lower.
"Annuity holders need to remember that they will not be getting a refund from their provider, instead it will be third-party investors trying to purchase their annuity payments. From an investment point of view there are many risks in buying someone else's annuity, so they will want to pay as little as possible. However, the main worry is the public being left vulnerable to companies trying to rip them off with unrealistic promises. We would like to see some safeguards introduced as part of these measures, such as an independent body with actuarial duties to allow people to see fair values of annuities so they can see exactly how any offer they receive compares."
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