The PLSA supported the previous Government's proposals for greater freedom and choice in how people access their money at retirement. We feel they have the ability to increase the attractiveness of retirement saving and give individuals greater flexibility to tailor their retirement savings to their needs. The proposals to create a secondary annuity market by changing the tax treatment of assigned annuities can be seen as an extension of these freedoms. However, these proposals do mark a critical shift, with existing beneficiaries of a retirement income now being allowed access to the pension freedoms.
However in our response to the Government's consultation on the Secondary Annuity Market we stated our belief that value would be hard to find in the market and specific regulation will be required to protect savers. This consultation sets out some of the new rules and guidance the FCA proposes to protect savers. These proposals include providing risk warnings, recommending advice, clearly stating charges, having regard to existing requirements on dealing 'With customers who may have diminished mental capacity. All the proposals in the document appear sensible in terms of providing consumers 'With the right information upon which to base the important decision of selling a guaranteed income for life, in particular the risks they face and the charges they 'Will incur. In particular the PLSA proposed that individuals 'selling' annuities above a certain value should be required to take advice and we are pleased that these proposals are being taken forward. The proposals also provide some level of protection from inappropriate charges.
However we do believe there are additional actions that could be taken maximise the success of this market. In particular we believe the FCA should consider what further action it would take to ensure what is likely to be a small market functions efficiently for both the buyer and the seller. For example rather than encouraging people to shop around the FCA should be actively looking to create one online portal for annuity quotes. Whilst we recognise that the FCA has a requirement to promote effective competition, in the case of the secondary annuity market where the number of buyers and sellers are likely to be small these feels inefficient and adds to the burden placed on advisers to assess fair value.
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