First you were told to buy annuities, then you were told not to buy annuities because there were pension freedoms and now you are being told you can sell your annuities if you thought they were rubbish! What on earth should the poor retiree do? Buy or not buy an annuity, take money direct from their pension (drawdown), and put their money in the bank, listen to advice, not listen to advice, sell the annuity which they thought was fine and now might not be?
It is hardly surprising that today's retiree has no idea what to do. Every day there is a new warning, product or change in the market. Now the government plans on introducing a secondary annuity market for those people who bought one and think they were given a rough deal to sell theirs on. But....how do they know what is a good or bad deal?
They bought something that they thought at the time was the best thing to buy. It was guaranteed income which would never be at risk. It would stay steady and be reliable and last the whole of one's life no matter how long one lived. What more could a pensioner want? But since Osborne announced 'no one need every buy an annuity again' the word itself has become toxic and the retiree has yet again been thrown into confusion.
One of the biggest brokers, Hargreaves Lansdown has refused to act as a market maker in secondary annuities. I think they are right despite the fact that they were one of the biggest sellers of annuities. Unless there is very careful scrutiny of value and outcome this could end up in disaster, just like so many other pension initiatives have.
The government, regulator and the financial services industry needs to make things simpler for people and not throw into doubt the very things people rely on. Otherwise how can people be expected to make a decision that affects the rest of their lives?
The FCA said last April that a new secondary market in annuities presented a “significant risk of poor outcomes for consumers”. The regulator said that annuities “are inherently difficult for consumers to value, and consumers who will be able to participate in this market will include a higher proportion of older, more vulnerable consumers”. The regulator said that such consumers included those with reduced mental capacity and individuals who may come under pressure to sell their annuity income, “although this may not be in their best interests”.