The Financial Conduct Authority (FCA) has launched a consultation on how the free guidance service Pension Wise should prepare for the secondary annuity market.
The Financial Conduct Authority (FCA) has launched a consultation on how the free guidance service Pension Wise should prepare for the secondary annuity market.
The remit of Pension Wise has been extended to cover the issue. In the consultation paper, the FCA identified four key areas where the standards should be updated.
These are: professional standards; knowledge requirements; minimum content a provider should cover in a session; and information collected from individuals during a session.
Steven Cameron, pensions director at Aegon, said: "While the document identifies the main areas to consider, we believe greater emphasis needs to be given to the very different implications of selling for a lump sum rather than transferring into drawdown.
"We also believe customers will want an early understanding of how their health status will affect selling price and the likelihood of having to provide verifiable medical evidence."
Cameron also encouraged advisers who are considering this market to review the standards.
In response to the FCA's consultation, annuity broker Hargreaves Lansdown confirmed that it would not be offering a broking service for second-hand annuities, citing a number of risks the market poses, such as longevity, costs
and fraud.
However, the company is reviewing whether it will offer advice to customers who are considering selling their guaranteed incomes.
Tom McPhail, the firm's head of retirement policy, said: "For a small number of investors, selling an existing annuity income in exchange for a lump sum may make sense.
"However, ever since this proposal was first made, we have been concerned that for many investors, it is likely to be a poor decision. We have therefore made the choice not to enter the secondary annuity market at this time."
McPhail had previously predicted that the overall market of selling second-hand incomes would be pretty small.
The consultation runs until 4 October. The FCA will look at the feedback and publish final standards in a policy statement in December.