Secondary Annuity Market

PensionTech

dunstonh wrote: »

Can you imagine the press coverage?

headline:
insurer pays 10% of what they took 5 years ago to buy back annuity.

It is, however, part of the plan set out in the government response to the call for evidence. Buyback will be allowed, although it will have to be done via an intermediary. Whether anyone will bother with it is a different matter.

Malthusian

Far more profitable to take out life insurance on a third party rather than buy an annuity, and then arrange an unfortunate accident.

I don't believe this has worked since the 19th century, when incidences of exactly this resulted in the "insurable interest" rule. If you don't have an insurable interest in someone - i.e. you don't stand to lose out in any way from their death - you aren't eligible to receive a life insurance payout.

Hence you can still bump off your spouse and get a payout, or your business partner, providing you get away with it (otherwise the legal principle that crime should not pay comes into force). But not random third parties.

Individuals will certainly not be allowed to buy individual annuities, it will be restricted to insurers and other institutions like other complex financial instruments. So if you did sell your annuity, looking over your shoulder should be the last thing to worry about.

PensionTech

So if you did sell your annuity, looking over your shoulder should be the last thing to worry about.

Well, if you sold your annuity, you'd be more likely to receive baskets of fruit and health advice and prescription medication than death threats - it would be in your interests to die early, and your purchaser's interests for you to die late.

Malthusian

worth it just to cash in on the mis selling compensation. Could be quite lucrative and those that didn't sell will be kicking themselves.

I know you're being facetious, but I still feel compelled to point out that there is a big difference between this and PPI.

PPI was heavily pushed by bank salesforces using hard-sell techniques, was written into contracts without explanation, and even added fraudulently by forging the client's signature. Misselling was so rife that the banks ended up having to pay out pretty much everyone who had PPI, even if they weren't defrauded or missold in any way, in some cases even if they never had it in the first place and the banks knew perfectly well they were trying it on (but didn't have time to prove it).

That's not going to be the case with secondary annuities. You aren't going to get someone called Darren ringing you up and pushing you hard to sell your annuity and suggesting that disaster will befall your kin if you don't sell it. Those who sell their annuity will have chosen to do so off their own bat rather than having the decision pushed or even forced on them. Given how poor the payouts will be, I suspect only a very small number will end up selling their annuity.

Which means if you sell your annuity and then go to the FOS crying misselling, expecting the same automatic payout you got with PPI, I suspect you're going to be disappointed.

RickyB2000

You say that, but why are people forced to take independent advice to transfer a DB pension? In theory that is off their own bat etc. Or rather why are IFAs so afraid to give advice in these circumstances, even to say don't do it? I would argue that you could always try and claim the information you were provided with didn't clearly spell out the risks for your specific circumstances etc, so mis sold?

Of course there is also a difference between being put back into the finacial position you would have been in and getting compensation. And yes, I was being facetious. Though I do wish I had PPI.....

bigadaj

Malthusian wrote: »

I don't believe this has worked since the 19th century, when incidences of exactly this resulted in the "insurable interest" rule. If you don't have an insurable interest in someone - i.e. you don't stand to lose out in any way from their death - you aren't eligible to receive a life insurance payout.

Hence you can still bump off your spouse and get a payout, or your business partner, providing you get away with it (otherwise the legal principle that crime should not pay comes into force). But not random third parties.

Individuals will certainly not be allowed to buy individual annuities, it will be restricted to insurers and other institutions like other complex financial instruments. So if you did sell your annuity, looking over your shoulder should be the last thing to worry about.

Interesting, I'd not heard that specific term before.

This all reminds me of the story about the women who was, at least a few years ago, the oldest human in record. I think she died at nearly 120, but had completed a form of equity release informally with a local lawyer, when she was about 80 and he was in his forties. She took the cash and he waited for her to die so he could get the property and make his profit. He died before she did.