Countless retired individuals would be given the capability sell their pensions, under government intentions to relax annuity standards and rules. Initial consultation documents are being composed by ministers.
As many as five million pensioners would be able to benefit from the propositions, if they would rather have money in their savings account rather than a guaranteed annuity income every year.
Reforms announced in last year's (2014) Budget should mean working men and women who stop working in future can cash-in their pension savings for a lump sum which they would be free to spend as they like.
An estimated five million pensioners who have already retired will miss out because they are locked into their contracts until they die.
Steve Webb, the Pensions Minister, in an interview with The Sunday Telegraph (4th January 2015) made it known that he wanted to modify the law to make it easy for these pensioners to sell their annual lifetime incomes-- called "annuities" - to the highest possible bidder at any time after they have stopped working.
Pensioners may well decide they would prefer to have funds than a guaranteed income stream to enable them to provide cash to children, to pay for house projects or to save.
The plan might be significantly appealing to people who possess more than one pension who would desire to possess money "up front" and completely trade in one pension fund rather than to get a modest amount directly from a low-value pension annuity each year.
The change would most likely also generate a fresh niche market in "previously owned" pensions, as insurance firms and other organisations procure individuals' annuities, bundle them together and sell them on in bulk.
Mr Webb said he had indeed been appealed to by pensioners to bring in the change, at the same time several main pensions providers and insurers had also articulated considerable interest and appreciation for the plan.
An estimated 400,000 men and women who retire each year use the funds they have laid aside while working to purchase an annuity-- an insurance product that pays out an annual income for the remainder of their lives.
For many individuals, it is the greatest financial choice they will ever engage in. In recent years annuity rates have plunged, trapping many pensioners in poor-value schemes that have destroyed the value of their lifetime savings.
The annuities market has additionally been criticised for profiting from people's confusion relating to the intricate plans by striking buyers with "astonishing" annual charges, and turning individuals off "shopping around" for the very best deal when they stop working.
The issue has ended up being particularly intense as a result of the collapse of final-salary pensions in the private sector, which do not demand that individuals buy annuities.
Mr. Webb's strategy trails the most progressive pension reforms in decades. Following strategies disclosed in last year's Budget, work forces will be allowed the control to take their lifetime savings in money when they retire, instead of being compelled to invest in an annuity, from April this year.
Millions who have already bought annuities will miss out. In some cases, they will have purchased their annuities quite recently and most will have done this for the reason that they had no choice.
There are nearly six million pension annuities presently being paid out, valued at about £11 billion each year. As several pensioners will have more than one plan, the Department for Work and Pensions approximates that this shows approximately five million people are now obtaining pension payments through annuity arrangements in retirement. If passed, this new law is likely to generate a great deal of interest and a very competitive traded annuity market.
Under the minister's strategy, the annuity pension would remain to stand but once they had been sold, payment would be designated from the first pensioner to an additional account holder, probably an insurance company or pension fund. The pension would carry on to pay out until the initial owner of the annuity dies.
Mr. Webb, a Liberal Democrat, wishes to commence a public consultation and release an agreed Coalition plan showing the change thoroughly prior to the general election in May.
He said he would want cross-party help from Labour in order to ensure that the reforms can be incorporated early in the next parliament, whichever party wins the election.
Mr. Webb said the reform would demand modifications to age-old rules governing the insurance industry, so as to allow people to sell their annuities. It would also need the Treasury to determine how cash purchases of pensions would be taxed.
Proper protections would need to be included in the program to defend against pensioners - specifically the very senior - being ripped-off if they choose to redeem their annuities for cash. But there are already strong signs that pension companies would welcome the reforms, he said.
If you have an annuity and could prefer to trade it in for a cash lump sum contact us at Best Pension Annuity, we will keep you updated on progression of the ministers plans and present you with quotes and relevant information if, and when, it becomes law.