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201611 annuity trading cancelled
In an announcement on 18th October
2016, the UK government made a surprise u-turn on their intention
to create a UK secondary market in annuities.
The creation of the market, which had been set to
launch in April 2017, would have provided an estimated five million
UK pensioners with the choice to sell their existing annuity in a
newly created open market; which SL Investment Management estimates
could have seen initial trading in excess of £500 million a
The UK government and regulatory authorities have
engaged with the industry in extensive consultations since March
2015. Having already postponed the creation of the market by a year
to allow the industry time to consult and prepare, the cancellation
of the market will be disappointing news to those who have been
working fervently to create a robust and competitive consumer
offering - but, it will be a massive blow to UK pensioners who were
looking to exercise their new pension freedoms from April 2017.
The government statement indicated, "It has become
clear that creating the conditions to allow a competitive market to
emerge could not be balanced with sufficient consumer
These were amongst concerns raised by the Open
University in their Secondary Annuity Market report published in
May 2016. Will Bramley, the author of the report said:
"… [the government] have underestimated the scale
of the problem, especially the real risk that competition will
simply not emerge, and that their proposals may not prove
sufficient to create a market that works for pensioners."
Research by SL has been investigating consumer
expectations in relation to the market. SL conducted the research
via their consumer website - Sellingmyannuity.co.uk - looking into
expectations on sales process, pricing, proceeds of sale
intentions, payment & retained benefits, etc.
The research clearly demonstrated that there was
significant interest from UK Pensioners looking to sell their
annuities, with over 250 voluntary respondents to the survey.
One of the key findings was that in selling their
annuity, annuitants were most likely to be looking to restructure
their finances; 32 per cent of respondents indicated they would use
sales proceeds to bolster their cash savings, with 31 per cent
intending to pay off debt.
Interestingly, less than 10 per cent of
respondents indicated they would use the proceeds for a purchase
such as a car or holiday; in contradiction to remarks from some
The research also showed:
Alec Taylor at SL commented, "There will be many
frustrated pensioners out there today who continue to be locked
into unwanted annuity contracts. Whilst it is disappointing that
the government have changed tack on creation of the market, the
rationale behind their approach is understandable, and consumer
protection concerns must be of paramount importance."
It is unlikely that the UK government will review
its decision in the near future; but should there be any future
changes in its stance, an update will be provided by SL.
For futher information, please contact Alec Taylor.