The Association of British Insurers (ABI) has set out what is needed to ensure that the UK government’s plans to create a secondary market for the selling of annuities can work for consumers.
The ABI’s reaction comes after UK Chancellor George Osborne proposed in the Budget that from April 2016, people who already have an annuity will be able to effectively sell it on.
Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on it.
In its submission to the government’s consultation, the ABI expressed its support in principle for the reforms, but urged for the implementation not to be rushed, given the considerable challenges in establishing a functioning market and ensuring adequate protection for consumers, especially access to advice and guidance.
The ABI said clarity is needed around the following points:
- How the rights of dependents and beneficiaries will be protected, particularly as many of them will be older people who may be vulnerable due to illnesses and reduced mental capacity.
- How people can be protected from scams and fraud.
- The exact scope of the proposals, which must be well defined, so that consumers are clear about exactly what is included.
- Whether consumers are allowed to sell their annuities back to the provider they originally bought them from, recognising that providers are not obliged to ‘buy back’.
Yvonne Braun, director of long term savings strategy, at the ABI said: "We want to work with government to help resolve these issues, but given the lessons learned from the freedom and choice reforms and the need for clarity in many areas, we urge the government not to rush these proposals through for 2016. Allowing more time will ensure an appropriate regulatory regime can be developed to give this new market a chance to succeed."