In October, thousands of retirees discovered they are stuck with their unwanted annuity incomes for life, as the government scrapped its plans to create a market for secondary annuities next year.
For those who had been relying on the opportunity to generate a cash lump sum in retirement from their ‘second hand annuity’, the decision will be deeply disappointing.
Secondary annuity market cancelled
The government said that after multiple debates and discussions with pension providers, consumer groups and industry regulators, the government has decided there would not be a large enough number of companies willing to purchase annuities to create a sufficiently competitive market.
Simon Kirby, the economic secretary to the Treasury, said:
“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.”
How would it have helped retirees?
Many people in retirement rely on the income generated by their pension annuity, and it is still the only way to guarantee a regular income for life when a person retires. Unfortunately, however, some are receiving meagre incomes from their annuities that they were forced into arranging by rules that are no longer in place.
Prior to the pension reforms of April 2015, a pension annuity was compulsory for those with a private or company pension fund, even if they only had a small fund to speak of.
It meant many people were forced to buy an annuity knowing it could only pay them a small and sometimes meaningless income, when the lump sum may have been far more useful.
The plans for a secondary annuity market would have allowed those retirees to sell their unwanted annuities in exchange for a cash lump sum in retirement.
Could you still raise the cash you need?
If you had been hoping to cash in your existing annuity policy to generate a cash lump sum in your retirement, you may wish to consider alternative options that could enable you to raise the extra money you need.
Equity release, also known as a lifetime mortgage, could enable you to unlock a tax-free cash lump sum from your bricks and mortar, without the need to make any monthly repayments on the loan.
With voluntary interest-payment plans now available, together with enhanced rates and higher releases for those with medical conditions, there is a plan to suit most requirements in retirement.
Speak to a specialist
If you are thinking about unlocking a cash lump sum from your home’s value then seeking specialist advice is essential to discover all the benefits and drawbacks, including, for example, how a plan will reduce the amount of inheritance you leave.
With so many different options and providers to choose from, your Bower specialist will take the time to explain all the advantages and disadvantages of each type of plan so you can make an informed choice.
Speak to us today to arrange your free, no-obligation initial consultation on [tel].