After an extensive programme of engagement with industry, financial regulators and consumer groups, the government has decided not to take forward plans to introduce a secondary annuities market because the consumer protections required could undermine the market’s development.
Over the past few months, following a wide range of discussions, it has become increasingly clear that creating the conditions to allow a vibrant and competitive market to emerge, with multiple buyers and sellers of annuities, could not be balanced with sufficient consumer protections.
Many firms have shown they are willing to allow customers to sell their annuities, but the government is clear that there will be insufficient purchasers to create a competitive market.
While exploring this further, it has become clear that the steps that the government would need to take to create purchasing demand in the market would undermine other consumer protections.
Consumer protection is a top priority for the government and we are not willing to allow a market to develop which could produce poor outcomes for consumers, such as receiving poor value for their annuity income stream and suffering higher costs.
The 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 government has always been clear that for the majority of people keeping their annuity incomes will be their best option, estimating that only 5% of people who currently hold an annuity would take advantage of this reform.