Tuesday, February 27

Osborne’s annuity scheme scrapped by Government



Controversial plans to let hundreds of thousands of pensioners sell their retirement annuities to insurance firms for a cash lump sum have been scrapped by the Government.

The scheme to create a secondary market for annuities was pushed by ex-chancellor George Osborne and aimed at allowing people more freedom to choose how to invest their pension pots.

In the UK, five million people have bought annuities which give pensioners a certain, guaranteed level of income.

But they have been controversial in recent years due to low rates giving people disappointing incomes.

The scheme was set to be launched next April but ministers now believe consumers may not get good value for money and so it will no longer go-ahead.

Under the plans, consumers would have been allowed to sell their annuity income, without tax restrictions that currently apply, as long as their annuity provider agreed.

Insurance firms willing to buy second-hand annuities and brokers who could arrange the deals would charge for their services, cutting the value of the annuity sale.

The Treasury said many firms showed they were willing to allow customers to sell their annuities, but there would not be enough buyers to create a competitive market.

However, a number of providers reportedly said they were not willing to buy back their own annuities or the annuities of other providers.

Economic Secretary to the Treasury Simon Kirby said: “Allowing consumers to sell on their annuity income was always dependent on balancing the creation of an effective market with making sure consumers are properly protected.

“It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited.

“Pursuing this policy in these circumstances would put consumers at risk – this is something that I am not prepared to do.”

Saga’s Paul Green said: “There will be many pensioners who will be sorely disappointed – thousands of people who receive minimal income from annuities they were forced to buy who would have benefited from a way to sell their annuity.

“Indeed, research carried out by Saga found that 58% of people who wanted to sell their annuity were receiving such a small income they could do nothing meaningful with it.

“It looks now that there will be no way for them to turn that meagre income back into a lump sum.”