Mike Fosberry discusses the potential for pensioners to sell their annuity for cash.
“I think a secondary market may well provide even worse value than the original annuity for those who wish to generate a tax free cash sum.”
“Insurance companies will hardly wish to pay more than their actuaries would determine the annuity is worth and a lot could have changed since the original annuity was taken out e.g. health – which any purchaser of the annuity will wish to check. “
“At the end of the day providing the flexibility to sell annuities carries with it the risk that people will make poor decisions when the principal benefit of an annuity is that it provides both certainty and covers off the longevity risk. Clearly annuity rates will be low in an era of low interest rates and increasing longevity and there is little to suggest that that will change anytime soon. “
“One benefactor of this type of annuity flexibility could potentially be the government. If people were to cash in their annuities – although I suspect they would get poor value for doing so – in the event that HMRC seeks to tax the lump sum as income, it would have a new source of tax revenue.”
| Mike Fosberry
Director, Financial Services
T: 020 7131 4250
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