Why Webb won’t ‘unwind’ legacy annuities

I understand the pensions minister’s view about unwinding annuities bought by retirees, I really do. Many of those especially that purchased their policy close to the new freedoms being announced, but not close enough to cancel, must be fuming at their bad luck.

But the can of worms that would result from trying to, in Mr Webb’s words “unwind” these policies means the idea will surely never get off the ground. By his own admission the government has already ruled it out before the next election.

It seems the minister feels bad because some retirees are locked into an annuity and can’t access the new pension freedoms. Well, as my dad always says: life isn’t fair.

Just think of the mechanics. Would you go back six months before the Budget? A year? Two years? How much profit would that cost already hard-hit providers to refund premiums while their new business sales are already nose-diving?

Such a move would surely be the end for specialist annuity providers which are struggling already. Partnership, for example, announced poor results yesterday which showed a 73 per cent drop in annuities and saw its share price drop to a low of 85p, less than a quarter of the price at listing last year of 385p.

Consider the furore when the Financial Conduct Authority suggested to a national newspaper that it was planning an inquiry into 30m legacy life and pension policies that could result in swaths of fees being restrospectively deemed non-compliant.

The ripple effect on the market saw FCA chief Martin Wheatley facing calls for his head, while an inquiry that will cost a seven-figure sum is still ongoing.

And the fees? The FCA was later forced to confirm it will not be undoing anything that was within the rules at the time.

Surely the same must happen here.