Industry figures have launched fresh criticism of proposals for a secondary annuity market as Age UK’s head of public policy warned demand for the idea would be difficult to suppress.
Figures from the retirement industry were sceptical of the likelihood of the market emerging as well as of its chances of success, but acknowledged that it could prove attractive to consumers.
Nigel Waterson, chairman of the Equity Release Council, told the Great Retirement Money Debate in London that a secondary market could be detrimental for consumers.
He said: “I am dubious as to whether the secondary market would develop. This is another mis-selling scandal waiting to happen. Even if it does go ahead, people who are desperate will take almost anything for their second-hand annuity.”
Jane Vass, head of public policy for Age UK, told the event that sellers could get poor value for old annuities.
But she warned that the idea would be difficult to dismiss after being made public, saying: “It is hard to see how the economics would work from a consumer viewpoint, but the genie is out of the bottle.”
|UK annuities market in 2013|
|6m annuity policies in payment, amounting to £13.3bn.|
|Approximately half of all annuities were purchased through an alternative provider to the customer’s existing pension savings provider.|
David Thomas, president of the PFS, said: “If people have the opportunity not to buy an annuity, it is only fair that people have the opportunity to come out in the right circumstances.”
In March 2015, the Treasury and the department for work and pensions issued a 35-page document, Creating a Secondary Annuity Market.
According to the Association of British Insurers figures cited in the paper, in 2013 there were approximately 6m annuities in payment, paying out about £13.3bn a year to an estimated 5m people.
Under the government’s plans, third parties such as asset managers, pension funds and insurers would be able to buy the second-hand annuities.
David Sinclair, director of the International Longevity Centre – UK, said that for people with small pension pots, an annuity would make little financial difference.
Matt Raine, one of the directors of Leicestershire-based TM Asset Management, said: “There are people who are locked into annuities that are probably quite unattractive and would like the opportunity to get some value for it.”