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15/12

Old Mutual Wealth comment on secondary annuity market

The Government has announced plans for a secondary annuity market, allowing more than five million people to exchange their regular retirement income for a lump sum:

News story: Millions given freedom over their pension as government outlines new secondary annuity market

Below is a comment from Adrian Walker, retirement planning manager at Old Mutual Wealth:

Development of the market

"The secondary annuity market is likely to be relatively limited and attractive to those currently in receipt of a small regular payment. For those people a lump sum may be viewed as more valuable.

"A survey we undertook with YouGov suggested that less than 20% of people ‎would consider selling their annuity, with the major factor for this reluctance being a concern they would not receive value for money.

"In any event, the safeguards that are put in place to protect anyone hoping to sell their annuity will be vitally important.‎ This market will be one where the potential buyers will be much better informed than the sellers. For the market to operate properly there will need to be effective competition and I will be interested to see where this competition comes from."

 

Advice requirement

“An annuity acts the same as a final-salary pension in that it provides a guaranteed income for life, often with built in guarantees such as a commitment to match inflation. Individuals with a final-salary pension and those in defined contribution schemes with safeguarded benefits are required to take professional financial advice before sacrificing pensions worth more than £30,000. It is logical that a second-hand annuity market should operate the same way, with people compelled to seek an expert opinion before swapping in a valuable annuity for a lump sum or an alternative pension income product. 

“The option to sell your annuity is not a bad one in principle. Some people will welcome the freedom and flexibility to trade in secure income for pot of money they can take flexibly in their retirement.

“However, before rushing into a decision, it is important that people remember that the market for second hand annuities is likely to be one in which buyers hold all the information and sellers are in a relatively weak position. Nonetheless, a good deal is in the eye of the beholder. For someone with debts or personal circumstances which mean an annuity no longer meets their needs,  taking cash could be an attractive option.”

For more information contact

Tim Skelton-SmithOld Mutual Wealth02380 916 99807824 145 076tim.skelton-smith@omwealth.com

Notes to Editors:

Old Mutual Wealth

Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

It has an adviser and customer offering spanning:

  • Financial advice delivered by the Intrinsic network in the UK and AAM Advisory in Singapore
  • Platform based wealth management and protection products delivered by Old Mutual Wealth in the UK & Italy* and Old Mutual International globally
  • Asset management solutions delivered by Old Mutual Global Investors
  • Discretionary investment management delivered by Quilter Cheviot.

Old Mutual Wealth oversees £119 billion in customer investments (as at 30 September 2016).

Old Mutual Wealth is part of Old Mutual plc a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million customers across the world and has a total of £342.7 billion assets under management (as at 30 June 2016).

*Old Mutual Wealth announced the sale of Old Mutual Wealth Italy to Ergo Italia on 9 August 2016. The transaction is pending completion.

This press release is for journalists only and should not be relied upon by financial advisers or customers. Investments may fall or rise in value and investors may not get back what they put in.