Steven Cameron, Aegon’s Regulatory Strategy Director says:
‘There’s no doubt there are some people who have bought annuities in the past who rightly or wrongly feel they missed out on more flexible options. Proposals to allow them to sell their future annuity instalments in return for a lump sum are likely to have an appeal. But it won’t be right for all – and for many, could be a very bad decision so it will need to be carefully designed to offer consumer support and protection.
‘With the new retirement flexibilities about to go live, raising the prospect of annuity purchase no longer being an irreversible decision could make choosing between the new range of options harder.
‘The industry – and indeed the Treasury – has been working flat out to be ready to explain the new options to customers. All this material assumes purchasing an annuity is an irreversible decision. If the Budget raises the prospect of a future change here advisers, providers and Pension Wise will need to work out how to reflect this.
‘The concept of re-selling existing annuities is worthy of further consideration – and part of this must be a detailed consultation around whether it can be implemented in a way that protects customers from making bad decisions or receiving poor value. A “secondary market” for annuities sounds complex and clarity will be needed on how this market will function and who will be involved.
‘Anyone turning future annuity income into cash is giving up a guaranteed flow of income – for their and possibly a partner’s future life. Swapping this for a lump sum, calculated based on a range of factors, is undoubtedly a complex and risky decision and specialist advice would be essential.’
Addressing existing annuitant concerns and avoiding complexity for future retirees
One way of avoiding further complexity for future retirees would be to restrict the ability to sell on annuities to those purchased before April 2015.
This would give existing annuitants a new option but would also keep a clear distinction between annuities and flexi-access drawdown for future retirees.
|
