In October 2015, former chancellor George Osborne announced plans to let pensioners sell their retirement annuities to insurance firms for a cash lump sum.
The change was due to come into effect in April 2017, but those plans have now been scrapped because, according to the government, the scheme would ‘put consumers at risk.’
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.
“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.”
The news has received a mixed reaction. Critics have accused the government of lacking a clear and coherent policy on pensions.
Paul Green – director of communications for Saga – said: “There will be many pensioners who will be sorely disappointed – thousands of people who receive minimal income from annuities they were forced to buy who would have benefited from a way to sell their annuity.
“Indeed, research carried out by Saga found that 58 per cent of people who wanted to sell their annuity were receiving such a small income they could do nothing meaningful with it.”
However, a number of figures within insurance and pensions industry had repeatedly expressed doubts over the proposals and the Association of British Insurers believes the government has taken the right course of action.
Rob Yuille – head of retirement policy for the ABI – said “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.”