Pension freedoms extended and a secondary annuity market is planned for April 2017 (Annuity Advice Bristol)
The UK government has announced that pensioners will have the right to sell their annuities via a secondary market from April 2017 in an extension of the government’s pension freedoms program. This will give many pensioners who had previously had no choice but to purchase an annuity income with their pension pots the ability to potentially sell their annuity with only their marginal income tax rate applied to the sale. Currently pensioners that wish to sell their annuity are subject to a 55% tax levy, rising to 70% in some cases.
The Government intends to work in conjunction with the Financial Conduct Authority (FCA) and the pensions industry to provide a tool with which pensioners can calculate an estimated value of their annuities. The government’s plans indicate that those pensioners who sell their annuities will be able to choose between receiving the proceeds as a lump sum (after payment of income tax) or place it into drawdown to use the proceeds more gradually.
Pensioners will have to sell their entire annuity and will not be permitted to sell part of their annuity. Annuity providers will continue to pay out all annuity payments due but these will be reassigned to the annuity purchaser.
Pension Wise (the governments free and impartial guidance service) will be expanded to help those pensioners thinking of accessing the secondary annuity market. However, pensioners will have to seek independent financial advice for annuities worth above a certain threshold. The threshold has not yet been decided on.
The source for this article is Reena Sewarz’s article in Love Money called Annuity Sell Back: Secondary Annuity Market to Launch in 2017. If you would like to read Reena’s article please click on the following link https://www.lovemoney.com/news/50046/sell-annuity-secondary-annuity-market-april-2017.
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