Secondary Annuity  

Webb admits secondary annuity market wasn't viable

Webb admits secondary annuity market wasn't viable

Former pensions minister Steve Webb has said the secondary annuity market "lost momentum and was not viable", which is why the government decided to pull the plug on it.

In a statement issued yesterday (18 October) Simon Kirby, economic secretary to HM Treasury, said the government had pulled its plans for a secondary annuity market because the "consumer protections required could undermine the market's development".

Mr Webb, who was pensions minister at the time plans for a secondary annuity market were announced, told FTAdviser that although he did not know plans to allow people to sell their annuity were going to be scrapped, he had "heard rumours and then the pensions minister was very down beat".

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He added that because there was an initial delay on the launch of the secondary annuity market, which was due to be launched in April 2016 but got pushed back to April 2017, providers did not invest heavily in making sure they were ready for annuities to be sold.

"They are not going to invest in something which may not happen," he explained.

"It is worth remembering there will be a lot of disappointed people this morning.

"The original idea was a response to public pressure. If there wasn't a change in government there might have been more of a commitment to it [by the government]."

At the time plans for the secondary annuity market were announced, chancellor George Osborne was in charge of setting the nation's taxes and there was a coalition government.

Today we have a Conservative government and are just one month away from new chancellor Philip Hammond unveiling his first Autumn Statement.

Dan Clayden, director of Devon-based Clayden Associates, said: "I think market forces prevailed there - there probably hasn't been an appetite for the purchase of second hand annuities.

"Long term secure income is a massively complicated task. It is difficult to give a value to the seller of the annuity.

"They [the government] have learnt from previous situations where things have been rolled out and people have thought it was a good idea and then it wasn't."

Earlier today (19 October), Mr Webb's successor as pensions minister Baroness Ros Altmann said thousands of people will feel let down by the government's decision to abandon the secondary annuity market.

She said: "Many have been waiting anxiously for the opportunity to undo the annuity they were forced to buy and will feel let down."

Baroness Altmann said many will be stuck for the rest of their life with an annuity they never wanted, and this was never likely to be a huge market, but for some individuals it would have been a potential lifesaver.

She said: "Those who bought an annuity because they were forced to do so, but would not have purchased one unless the law required it, have been waiting desperately for an opportunity to sell it but that opportunity is now being taken away from them."