Since April, pensioners have had greater freedom and choice about how to deploy pension assets. Our response to the current consultation on creating a secondary annuity market will suggest there is no justification for denying those same benefits to those already with annuities.
Criticisms of the proposals tend to emphasise the downside risk to consumers and upside gain for purchasers. But a secondary market has the “win-win” potential to attract both sellers and buyers.
Determining value for a pensioner is not a simple mathematical formula – it varies from person to person. It may be pure economical value, peace-of-mind for dependants or preserving value for the next generation.
People benefiting from regulated advice chose guaranteed income because at the time it was an effective solution to meet their income needs in retirement. But circumstances and priorities do change, so the ability to reconfigure or trade an annuity may be beneficial. And some of those who bought without advice may wish to rectify a poor initial choice.
It is not hard to think of examples where a rethink could be helpful. Some who mistakenly bought single life annuities may wish to reconfigure their benefits to add protection for a spouse. Others who did not add value protection to their annuity may wish to take advantage of the new favourable taxation rules and transfer their value into a new retirement product to preserve assets for the next generation.
People with valuable guaranteed annuity rates approaching retirement who have a need for a lump sum may create more value by accepting the annuity and trading this in the open market rather than taking the cash value of the accumulated pension savings.
The big challenge facing government is to create a transparent and competitive market so pensioners are offered a fair deal.
Stephen Lowe
Group external affairs and customer insight director,
Just Retirement,
Reigate, Surrey
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