More than five million people will be able to sell their annuity from 6 April 2017!

JoeCrystal

Hi,

Came across this press release first thing this morning:

Link To News Story

I cannot but help to think what could possibly go wrong with that!

Joe

brewerdave

Oh God .....another excuse for the cold callers to phone !!:eek:


....and then a few years down the road ...more calls telling me that I was short changed when I sold it ......compensation !!!!!!!:(

greenglide

But it all depends on somebody being willing to buy the annuities "for the lifetime of the annuity holder".

Sounds very complex to monitor the continuing life of the seller of the annuity when there are no longer monthly payments being made.

I suspect that many people will be surprised how little they may be offered to buy the annuity and this, presumably, will depend on age and health of the annuitant.

SailorSam

I haven't read the link yet but how is this different from the one they brought in about cashing-in your insurance.

dunstonh

So far, it appears that financial advice will be mandated for larger ones (and possibly on all as that is still under consultation) and that advisers may need a further qualification to create a standard of some sort.

Expectation is that only a very tiny number of annuities will be worth being sold. That immediately puts me on alert as that would suggest that any adviser recommending a second hand sale of annuity knows that they are going against the norm and that increases the risk to the adviser. You have to ask yourself whether paying more in PI premiums (as an adviser) and paying for more qualifications is worth it to provide advice on a product option that you may only give once every few years and possibly never recommend in your working life. It doesnt look attractive from an adviser point of view. I can imagine plenty of recommendations not to do it with an insistent client overriding the adviser.

Annuities rates benefit from mortality gain. People with poor health can get a higher annuity rate. However, both of those things will work against people if they try to sell the annuity. My expectation is that the cash value will be very low in most cases. Maybe only a handful of years worth of income. Plus you have the tax.

DaveMcG

Just had a first look through the govt document

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/485286/creating_a_secondary_annuity_market_response.pdf

They don't seem to have made any progress at all on the major problems with the proposal and simply told the FCA to find a way to make it work.

They mention the Equality Act in the document. As it is now illegal to discriminate on the grounds of gender when purchasing annuities, will it be similarly illegal to discriminate when selling? If so how will that be enforced?

Malthusian

This is just reheated and recycled news. The government has already said that you will have the right to sell your annuity. They don't say that anyone has to offer you a decent price for it. For various reasons already well covered, the lump sum value of an annuity is likely to be paltry compared to the income.

If advice is required then this is likely to be the "insistent client" "I want my money out but no-one will let me" pension freedoms debacle, but even worse. If you have a pension fund of £100,000 you want to encash, an adviser can reasonably charge you a transactional one-off fee of 3% which should cover his time and regulatory costs - many still won't want to take on the risk but that's up to them, you should be able to find someone that will.

If you've been drawing a typical annuity for five years and now want to cash in, you'll be lucky to get £25,000 (before tax). Even that may be an overestimate, given that the people looking to cash in an annuity are likely to be in poorer health. It's just not possible to take an economic fee from that, one that covers the advisers' costs and liability without being disproportionate to the benefit the client will get. So if the government forces people to take advice they will be stuck.

System

Why would you want to buy an annuity tied to the life of a complete stranger, when you could buy one based on your own life?

You'd spend the rest of your life worrying about his health, his driving abilities and his drinking habits, and then at any moment he might drop dead and your income would be gone.

coyrls

Clifford_Pope wrote: »

Why would you want to buy an annuity tied to the life of a complete stranger, when you could buy one based on your own life?

You'd spend the rest of your life worrying about his health, his driving abilities and his drinking habits, and then at any moment he might drop dead and your income would be gone.

Pool the annuities and create an Annuity Backed Securities product, what could possibly go wrong?

redux

I used Google to check up on my vague memories of investment trusts specialising in traded endowments.

Articles in 1993, 2001 ...

Where are they now?

A Dresdner one intended to run until 2009 was wound up in, yes, 2009.

Brogden

If an annuity is 'property' then I suppose it could be allowed to be sold but......what a stupid idea.

Who on earth is going to put tens or hundreds of thousands of pounds to buy an income stream which may cease at any time at all if the original annuitant pops their clogs?

The pension annuity exists to allow somebody to buy an income that will last 'their' life. I feel the politicians have missed this and just see this as an 'income yielding asset.' What a joke !!