UK Treasury to launch secondary annuity market in April 2017
By Carolyn Cohn
LONDON (Reuters) - Britain's finance ministry will introduce a secondary market in annuities from April 2017, it said on Tuesday, extending a shake-up in the pensions market which has curbed demand for these fixed-rate pensions products.
More than five million people will be able to sell their annuity following the removal of tax restrictions, the UK Treasury said in a statement.
Pensions freedoms introduced this year mean retirees no longer need to use their pension pots to buy an annuity, which gives an income for life.
The new secondary market will enable those who already bought an annuity to sell it for an upfront cash sum. Annuity buyers are expected to be pension providers who can use the purchased pensions as a hedge against their own liabilities.
“For most people, sticking with an annuity is the right thing to do," Harriet Baldwin, economic secretary to the Treasury, said in a statement.
"But there will be some who would welcome being able to draw on that money as they choose - the same freedom we gave people approaching retirement in April this year."
The Treasury said this year it was delaying plans for the secondary market from an original planned launch date of April 2016, to allow time to develop protection for consumers.
The Financial Conduct Authority has warned that pensions scams were likely to increase as a result of the previous pensions changes, which have dented annuity sales by nearly half.
The Treasury said on Tuesday it would extend its Pension Wise guidance service to the secondary annuity market, and require individuals to seek independent financial advice for annuities above a financial threshold, without specifying the level.
It said it would ask the FCA to provide a consumer protection framework which could include risk warnings and ways for consumers to understand the fair value of their annuities.
(Editing by Rachel Armstrong and Jason Neely)
