The government has abandoned plans to create a market for secondary annuities after it was concluded that conditions for a competitive market were not compatible with effective customer protections.
Several pension providers had indicated they would be willing to allow customers to sell their annuities, but the government concluded there would be insufficient purchasers to create a competitive market.
It was also concerned steps it would need to take to create purchasing demand in the market would undermine other consumer protections.
It added that for all but approximately 5% of people, keeping their annuity would be the best option.
The proposals were initially made in December 2015 and would have seen retirees able to take the annuity as a lump sum, or place it into drawdown to use the proceeds more gradually.
Previous pension reforms, which came into effect in 2015, offered these options only to those who had not already retired and so not exercised their right to an annuity. Pension reforms brought in during the last government mean annuities are no longer compulsory.
The Association of British Insurers (ABI) described the decision as the ‘right decision for the right reasons’.
ABI head of retirement policy Rob Yuille added: ‘The industry has consistently supported the freedom and choice reforms, but we agree with the government that the secondary annuity market came with considerable risks for customers, including from unregulated buyers.’
Economic Secretary to the Treasury Simon Kirby said allowing consumers to sell on their annuity income ‘was always dependent on balancing the creation of an effective market with making sure consumers are properly protected’.
He added: ‘It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited.
‘Pursuing this policy in these circumstances would put consumers at risk. This is something that I am not prepared to do.’
