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."
“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.”