The financial planning director at Tilney BestInvest has warned that the secondary annuity market could prove “financially disastrous”.
David Smith said there are many pitfalls which pensioners need to overcome and warned the sale of an annuity would need financial advice.
He said: “While much has been written about the new pension freedoms, the devil is in the detail and there remain potential pitfalls which those facing retirement need to overcome.
“The change which now allows annuity holders the option to convert their guaranteed income streams into cash lump sums for example is a serious decision that could prove financially disastrous, and one which in most cases should only be taken in the light of professional advice.
“While some may feel that they can go it alone without the help of a professional, it is important to bear in mind factors such as increasing life expectancy when planning your retirement and to make sure you have a coherent strategy for your later years.”
Research carried out by YouGov on behalf of Tilney BestInvest found 28 per cent of people would turn to a financial professional such as an adviser for help on pensions.
Tom Dean, a chartered financial planner with London-based Plutus Wealth Management, said: “Advice will definitely be needed because it will be a big decision to reverse that annuity purchase.
“Much will depend on competition and liquidity in the marketplace. If that’s there I can see it operating reasonably well but I am not convinced it will be.”