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Old Mutual Wealth comment on secondary annuity market

15/12/2015

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

Old Mutual Wealth oversees £131.3 billion in customer investments (as at 30 September 2017).

It has an adviser and customer offering spanning: Financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

Old Mutual Global Investors (‘OMGI’) is the asset management business of Old Mutual Wealth with £39.8bn funds under management (as at 30 September 2017). On the 19th December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Following managed separation from Old Mutual plc, Old Mutual Wealth will rebrand to Quilter plc. Each of the businesses within the Quilter Plc group will be rebranded over a two-year period, with the exception of Quilter Cheviot, which will retain its existing name.

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 (as at 31 December 2016) customers across the world and has a total of £212.3 billion of assets under management (as at 30 June 2017).

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