Among wide-ranging reforms for pensions announced by the Government last year was a proposal that pensioners would be able to sell their annuities*.
It went alongside new rules, which are now in place, to let people take their pensions in cash up to any available amount.
The annuities change was to come into force in 2017, but has now been scrapped by ministers.
This has upset some people who saw it as a chance to divest themselves of poorly performing annuities. However, it’s not hard to understand the reasons the Government has made this move.
The view of ministers is that it was unlikely that there would be a solid market for selling-on annuities. There would only ever be limited companies who were likely to want to get into that business and even those who did would need to ensure it was profitable for them.
It’s hard to make a meaningful return on an annuity if it’s already one that someone wants to get rid of… And of course in order for individuals to assess whether they would be wise to sell an annuity, they would almost certainly need to seek independent advice, which would unavoidably add some costs to the process – and every bit of cost eats away further at the value of the product they would be trying to sell.
That’s not to say there won’t be people who had pinned their hopes on this proposal who won’t be very upset by the change of heart. Those who retired at the time of weak stock markets but were forced to buy an annuity in that poor market have suffered, receiving lower values for their years of saving than they deserved. Their best approach at this stage will be to properly re-assess their overall position in light of this move and work with experts to find the best ways of making the most of the resources they do have available to them.
Our recommendation, no matter what the state of the economy or the size of your pension pot, is to make sure you get good advice from experienced people who will tailor it to your personal needs and current and likely future situation.
* Annuities are, in short, a product which allows you to turn your years of contributions into a guaranteed, fixed income which is paid monthly for the rest of your life.