This would give existing pension annuity holders the option to sell their policies in return for a taxable cash lump sum.
As we approach the second Budget of the year on 8th July, and the planned implementation date for this second-hand annuity market in April 2016 draws closer, what would it take to make the scheme work?
The Association of British Insurers (ABI) have some ideas.
In its submission to the Government’s consultation, the ABI expresses its support in principle for a second-hand annuity market but urges for the implementation not to be rushed.
This is because there are considerable challenges in establishing a functioning market and ensuring adequate protection for consumers, especially access to advice and guidance.
The ABI’s response sets out what is needed to ensure the proposals deliver for customers. They have said more clarity is needed around:
-How the rights of dependents and beneficiaries will be protected, particularly as many of them will be older people who may be vulnerable due to illnesses and reduced mental capacity.
-How insurance companies will protect people from scams and fraud.
-The exact scope of the proposals, which must be well defined, so that consumers are clear about exactly what is included.
-Whether consumers are allowed to sell their annuities back to the provider they originally bought them from, recognising that providers are not obliged to ‘buy back’.
Dr Yvonne Braun, Director of Long Term Savings Strategy, Association of British Insurers, said:
“The Government’s proposals to create a secondary annuity market will potentially extend the Freedom and Choice reforms, and we want them to work for customers.
“Naturally there are considerable challenges in establishing a functioning market, and many unresolved complex legal, regulatory and prudential questions.
“We want to work with Government to help resolve these issues, but given the lessons learned from the Freedom and Choice reforms and the need for clarity in many areas, we urge the Government not to rush these proposals through for 2016.
“Allowing more time will ensure an appropriate regulatory regime can be developed to give this new market a chance to succeed.”
Will the reforms needed to create a second-hand annuity market be ‘rushed through’ in time for April 2016, as originally planned, or is more time likely to be taken over the plans?
We look forward to hearing more about these proposals, perhaps in the Budget next Wednesday.