Following on from the recent pension freedoms introduced which mean that you are no longer obliged to buy an annuity for your complementary pension; the government have realised that many existing annuity holders feel left out. They therefore propose to create a secondary market so that you could sell your annuity back, probably to other institutions who may want to buy.

Care must however be taken here:

1) You would be swapping a guaranteed income stream for an investment risk.

2) You could get less for your annuity than you paid in.

3) It is not yet clear whether the arrangement will be taxable.

4) Annuities are based on you being alive so whoever purchases one is taking a risk on your life so there will need to be a way for the purchaser to be informed about your death otherwise they may have to pay back any payments received after death!! 

This all sounds very capitalistic to me and whilst understandably exciting for those who fully understand and are financially literate, it has the potential of leaving some people exposed in later life. Typically the financial world will be blamed if such schemes are found to be too complicated or to the disadvantage of elderly people who will have to manage a lump sum in a complicated and not totally transparent investor market. We would love to hear your comments positive or negative.

Share with your favourite site(s).