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

PensionTech

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?

Yes, I expect so, as it will be a contract-based arrangement. It will be forced in the pricing - the calculation of the lump sum offered in exchange for the annuity will not be able to take gender into account as a factor, much the same way as the calculation of annuities is restricted on the same basis. The annuity purchase market will be regulated by the FCA so they will be able to set this out in their rules.

greenglide

the calculation of the lump sum offered in exchange for the annuity will not be able to take age into account as a factor, much the same way as the calculation of annuities is restricted on the same basis.

But surely annuities are tied to age and become cheaper as you get older as the remaining life expectancy gets less?

The governments own Class 3a SP Top up gets cheaper as you get older. What they dont, and presumably cannot do, is take into account the difference in life expectancy between males and females?

System

PensionTech wrote: »

the calculation of the lump sum offered in exchange for the annuity will not be able to take age into account as a factor, .

You mean an 80-year old will be able to sell his annuity blind and get the same price as if he were 60 with perhaps a 20 - year income stream remaining?

It sounds even barmy-er than I thought. Buyers will just take pot luck on buying a good risk or a poor one?

SnowMan

They will be able to take into account age (of course). It's obviously a typo in PensionTech's post, 'age' should have been 'sex'.

There is an exemption under the Equality Act for financial services for age discrimination which means that they don't subject to certain provisos even have to 'objectively justify' this

http://www.equalityadvisoryservice.com/ci/fattach/get/588/1354033540/redirect/1/session/L2F2LzEvdGltZS8xNDUwMTkxMTExL3NpZC9yOFMyRzFFbQ==/filename/financial-services.pdf

The consultation response makes this clear also

2.7 While there might be high levels of consumer interest, the number of people who sell their annuity income streams will depend in part on the price that purchasers are willing to pay. The price individuals will be able to obtain will reflect various factors, including the level of the annuity payments, the customer’s health and age, buyer profit margin and buyer costs

PensionTech

Yes, sorry, I did indeed mean gender!

DaveMcG

PensionTech wrote: »

Yes, I expect so, as it will be a contract-based arrangement. It will be forced in the pricing - the calculation of the lump sum offered in exchange for the annuity will not be able to take gender into account as a factor, much the same way as the calculation of annuities is restricted on the same basis. The annuity purchase market will be regulated by the FCA so they will be able to set this out in their rules.

hmmm it is one thing to construct a unisex mortality table and use this for published annuity rates, but this proposal is in theory going to be an auction system of some kind and based on individual circumstances.

How is the person valuing the policy going to ignore a fact that is relevant to that value without acting in bad faith to the potential investors who have asked his advice as to value?

neilvw

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.

I haven't read the document yet but I think the idea is that insurance companies and the like will buy up shedloads of these, thus pooling risk (solving the issue you raise) and hedging their risks elsewhere in the business (e.g. paying out annuities to others).

The idea of chasing an annuitant round town, nagging him about his health and driving habits is rather amusing though.

patanne

Perhaps they could be bought by your local medical practice then they really can keep an eye on your health, with the added benefit that you won't need to wait for an appointment. Sounds mad - well it's no madder than this brilliant idea, but then I assume the money will be taxed on its way out of the annuity, and that is all this is about. The income stream from cashing in the 'pension pot' must be slowing down!

PensionTech

hmmm it is one thing to construct a unisex mortality table and use this for published annuity rates, but this proposal is in theory going to be an auction system of some kind and based on individual circumstances.

How is the person valuing the policy going to ignore a fact that is relevant to that value without acting in bad faith to the potential investors who have asked his advice as to value?

Let me ask you this question: if evidence shows that people of a certain ethnic background have a different life expectancy, would you expect the entities valuing the policy to take an individual's ethnic background into account?

Malthusian

Let me ask you this question: if evidence shows that people of a certain ethnic background have a different life expectancy, would you expect the entities valuing the policy to take an individual's ethnic background into account?

If it's underwritten, then yes, of course. The Scots get better annuity rates than the English, is that racism?