LITRG Press Release: Freedom to sell annuities may come at too high a price for those on low incomes
The LITRG is concerned that people on low incomes may be unable to benefit from welcome freedoms to convert their annuities.
In March 2015, the Government announced its plans to allow people who already have an annuity to exchange it for a cash lump sum, a drawdown scheme or another more appropriate annuity
– by creating a secondary annuity market. Since then, the decision has been delayed until April 2017.
While LITRG supports the freedoms, it is anxious at suggestions that it should be obligatory to get financial advice before accessing the secondary annuity market. The tax campaigners
say that many of the people who wish to take advantage of the secondary market will be those with small annuities, some worth as little as a few hundred pounds a year. It is unlikely they will pay an independent financial adviser hundreds of pounds from these
amounts to receive advice which may be of limited value to them in their financial circumstances, as that would stop them putting their pension money to better use.
The campaign group said that staff at the free to access Pension Wise could step in and be trained and empowered to explain the facts of a course of action about the secondary annuity
market, without having to break their remit by giving advice or specific recommendations.
Anthony Thomas, LITRG Chairman, said
“More serious thought needs to be put into the mooted obligatory use of financial advisers to access the secondary annuity market. Many people on low incomes may not be able to
afford such financial advice even if they want to benefit from such a market. We must be very careful that we are not denying those of modest means the benefits of the greater freedom on pensions.
“We strongly urge the Government to consult carefully on what sort of advice is most suitable for those with small annuities, to prevent large numbers on low incomes being unfairly
excluded from the secondary annuities market. Some form of exclusion from obligatory financial advice for small pension sums should be looked at. There should be provision in the proposed new public financial guidance service for free advice on how to shop
around for the best deal and also for clear warnings on the predatory activities of scammers, ever alert to separating the unwary from their money.”
LITRG also told the Government that legislation should be widened to include all pre-pensions reform annuities, regardless of type – to take account of old-style contracts and old
obscure pensions schemes – and that all payments should be made to the person to whom they would have been made had the annuity not been sold on.
Anthony Thomas said:
“We are pleased that the Government is attempting to level the playing field between pre-and post-pensions freedom annuitants because it promotes equality of opportunity and outcome.
We particularly welcome the Government’s relaxation of its stance on buyback by original annuity providers, since for those with small annuities, this may be the only route available.”
LITRG’s recent submission to the Government can be read here.
(22-06-2016)
Contact: Paddy Millard (please use form at http://www.litrg.org.uk/contact-us)
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