Britain delays plans for secondary market for annuities

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London | July 09, 2015 7:30 AM

Britain is putting a brake on plans for a secondary market in annuities to allow time to develop protection for consumers wishing to trade in their pensions, finance minister George Osborne said on Wednesday.

Britain is putting a brake on plans for a secondary market in annuities to allow time to develop protection for consumers wishing to trade in their pensions, finance minister George Osborne said on Wednesday.

Following a huge shake-up in UK pensions, implemented earlier this year, retired people have more freedom over what to do with their pension pots, with no obligation to buy an income-bearing annuity.

The changes give more choice to those yet to retire, but there are around 5 million people who already have annuities who may wish to trade them in for cash or a more flexible pension.

Osborne said in the budget statement that the government would set out plans for the secondary market in the autumn.

But he added the government agreed with respondents to a recent industry consultation that “implementation should be delayed until 2017 to ensure there is an in-depth package to support consumers in making their decision”.

The government had previously said it wanted to introduce the secondary market in April 2016.

Industry experts said there was a danger that pensioners would not take adequate, or any, advice before selling their annuities, which give an income for life.

“You can see demand for the market, but it needs to be regulated,” said Stewart Hastie, pensions partner at KPMG, adding that issues could even arise from “unscrupulous family members encouraging people to cash out”.

Annuity buyers are likely to be pension providers who can use the purchased pensions as a hedge against their own liabilities, Hastie added.

Trade body the Association of British Insurers said the new timetable was a “very welcome move and follows strong representations from the industry that the previous timetable was too quick.

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