Pensioners to Sell Back their Annuity Must not be Rushed, Insurers say

The government wants to extend the pension overhaul to allow pensioners to sell back their annuity - a fixed retirement income - to providers.

But a trade body says the proposed April 2016 start date puts people at risk of scams.

It said lessons should be learned from recent pension changes that allowed people to cash in a pension pot.

Under those rules, which took effect in April this year, many people aged 55 and over have been able to cash in their pension savings rather than buying an annuity.

The latest proposals would allow five million pensioners who have already bought an annuity with their pension pot to sell it back.

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The Association of British Insurers (ABI), which represents insurers who manage pension money, said that the rights of pensioners' dependents needed to be protected.

The scope of the proposals needed to be more clearly defined, it argued in its response to government consultation, including whether annuities could be sold back to the provider, but without an obligation on that provider to agree to the deal.

"Naturally there are considerable challenges in establishing a functioning market, and many unresolved complex legal, regulatory and prudential questions," said Yvonne Braun, of the ABI.

"We want to work with government to help resolve these issues, but given the lessons learned from the [recent] reforms and the need for clarity in many areas, we urge the government not to rush these proposals through for 2016.

"Allowing more time will ensure an appropriate regulatory regime can be developed to give this new market a chance to succeed."

The new Pensions Minister, Ros Altmann, recently told the BBC she firmly supported the plan for a secondary annuities market.

A spokesman for the Treasury said: "We are removing restrictions on selling annuity income so that the five million people who have already bought them have the same freedom as everyone else."

Pension changes 2015

• People aged 55 and over can withdraw any amount from a Defined Contribution (DC) scheme, subject to income tax
• Tax changes make it easier to pass pension savings on to descendants
• Many people with Defined Benefits (DB) schemes will be allowed to transfer to DC plans
• All retirees will have access to free guidance from the government's Pension Wise service
• Existing annuity holders unaffected for the time being