Government and regulator plans for the secondary annuity market are progressing. The policy, which will give customers the opportunity to sell an existing annuity in order to access the new pension freedoms, is due to launch in April 2017. The consultation procedure is now well under way, with a number of parties calling for input on the legislation, tax framework and practical rules and guidance. The IFoA is in the process of responding to these consultations, providing the actuarial perspective on this im
The IFoA has also commissioned a research survey from YouGov, which found that 68% of respondents (UK pensioners) would be unlikely to cash in their annuity for a lump sum. Some additional findings from the research were as follows:
- Respondents said being able to sell their annuity was a good idea in general, but not necessarily a good idea for themselves
- Younger age groups and the less financially secure reported being more likely to sell their annuity
- 55% reported that they didn't know what they would do with the lump sum received were they to sell.
Interestingly, respondents said they would seek to receive, on average, 94% of the value of their annuity as a cash lump sum if they were to sell their policy. This amount could be significantly in excess of the offers made by potential buyers. Equally, for the 54% of respondents who said they would seek financial advice before making this decision, the average price respondents said they would be willing to pay was £162, which could be well below the cost of such advice.
Over the consultation period and until the launch in April 2017, the IFoA will be involved in informing the debate around the secondary annuity market - not only by taking part in the formal consultation but also by meeting key government, industry and regulatory stakeholders.
View the full research results at bit.ly/1O2iCeJ.