Unless you have been living in a cave over the past year, you cannot have failed to have heard about far-reaching pension reforms that took effect from April this year, which meant that those who wished to access their retirement benefits were no longer required to purchase an annuity.
Legislation has been chugging along, and as we head towards April 2017, those who have previously purchased annuities will be given an element of flexibility too. In June this year, it was announced that the Treasury had backtracked and now plans to allow providers to buy back annuities from existing customers.
People wanting to sell their annuities above a certain value will be required to take advice, although this threshold has not yet been set.
In a call for evidence published on 16th December 2015, the Treasury says: “While the Government recognises the benefits both to annuity holders and the industry of permitting this ‘indirect buy back’ through brokers, financial advisers or other intermediaries, it acknowledges that an extra layer of cost would be imposed in comparison to direct buy back. In addition, buy back would only be possible ‘if’ platforms or brokers enter the market."
Hidden away in the final line of the previous paragraph is the little word ‘if’. I now fear a sense of déjà vu; while legislation will allow a client to sell their annuity, it will depend on whether the company that holds the annuity wishes to play ball. I say this, as eight months into the current pensions reforms we still encounter many pension providers that are not willing or able to offer clients the flexibility they want from their money!
It’s going to be interesting. Watch this space!