Secondary annuity market
In March 2015, the government announced their plans to let people who already have an annuity exchange it for a cash lump sum – by creating a secondary annuity market. However, on 18 October 2016, the government decided to cancel these plans.
What is a secondary annuity market?
The UK government planned to launch a market in April 2017 that would allow customers who had already bought an annuity to sell their policy to a provider. In exchange, they would receive a cash lump sum for these ‘second hand’ annuities. This was dubbed the ‘secondary annuity market’.
The idea behind this was to build on the new pension freedoms launched in April 2015 by giving retirees more choice in retirement.
Why did the plans not go ahead?
Up until the announcement on 18 October 2016, the creation of a secondary annuity market was a proposal under review by the government.
However, after discussing this with pension providers, industry regulators and consumer groups, the government felt there would not be enough companies willing to purchase annuities to create a competitive market. Simply put, it seemed unlikely that there was enough competition in the market for customers wanting to sell their annuities.
This meant that they could not guarantee customers would get good value for money, and as a result were concerned that customers could be at risk.
We strongly support efforts to allow customers to choose how they manage their retirement money, and the pension freedoms were a positive step forward in this direction. We were supportive of the proposed secondary annuity market, but only if there were sufficient safeguards for customers to ensure they received good value for their money.
The lack of competition in the market meant this would not be the case.