Pension experts have picked apart the latest consultation paper aimed at developing the Government’s promised secondary annuity market..
From April 2017, annuity holders will have the option of selling or ‘assigning’ future income instalments to certain third-party firms, in return for a cash lump sum or an investment into a flexible drawdown policy.
Today, HM Revenue & Customs set out its proposals on how rules will be changed to allow such a market to develop. But pensions experts claim the paper leaves unanswered questions.
Steven Cameron, pensions director at Aegon UK, said a surprise new development was that those receiving annuities to cover their pension from a trust-based scheme may now qualify.
He added: “Sometimes, trustees of workplace pensions have arranged for an insurance company to pay the scheme pension through an annuity. Here, the annuity may still be legally owned by the scheme, but HMRC will allow the trustees to make changes to offer these members the right to sell their annuity.”
Jon Greer, pensions technical manager at Old Mutual Wealth, said the secondary annuity market is doomed unless the Government finds a solution to one fundamental point.
“There is nothing in the document released today that deals with the death of the original annuity holder and how the insurer will ever know.”
The Financial Conduct Authority is expected to shortly publish its own regulatory plans for how the interaction between buyers, sellers and intermediaries will operate.
Carl Lamb, managing director of Norwich-based Almary Green, said that his firm will be going nowhere near this market, much like its avoidance of pension transfer ‘insistent clients’.
He added: “The record keeping alone would be horrendous – I’d suggest treating it with kids gloves.”