The Treasury is expecting 250,000 people to sell on their annuity in the first two years of the market opening.
According to official estimates, policy costing for the second-hand annuity market reveal the government projects to raise more than £1bn in additional tax receipts between 2016 and 2018.
Some 250,000 investors are expected to rush to sell on their annuity-based on the Treasury’s estimated £1.075bn of tax revenue when all tax is levied at the basic rate of 20 per cent and the median annuity purchase price has been around £20,000 in recent years.
The figures were projected in the 67-page Budget 2015: Policy Costings document, in which the government admitted it did not know how much of an effect the new freedoms would have on the British economy.
The document said: “The effect on the economy of the pensions and annuities flexibility measures is considered to be subject to particularly significant uncertainty.”
Adviser view
Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown, said: “It is far from certain that this scheme can ever be developed at all, much less that it can raise this kind of revenue for the Treasury, without exposing hundreds of thousands of retired investors to a mis-selling risk.”
