Opinion Former Article

Freedom to sell annuities may come at too high a price for those on low incomes

The Low Incomes Tax Reform Group (LITRG) is concerned that people on low incomes may be unable to benefit from welcome freedoms to convert their annuities.

In March 2015, the Government announced its plans to allow people who already have an annuity to exchange it for a cash lump sum, a drawdown scheme or another more appropriate annuity – by creating a secondary annuity market. Since then, the decision has been delayed until April 2017.

While LITRG supports the freedoms, it is anxious at suggestions that it should be obligatory to get financial advice before accessing the secondary annuity market. The tax campaigners say that many of the people who wish to take advantage of the secondary market will be those with small annuities, some worth as little as a few hundred pounds a year.  It is unlikely they will pay an independent financial adviser hundreds of pounds from these amounts to receive advice which may be of limited value to them in their financial circumstances, as that would stop them putting their pension money to better use.

The campaign group said that staff at the free to access Pension Wise could step in and be trained and empowered to explain the facts of a course of action about the secondary annuity market, without having to break their remit by giving advice or specific recommendations.

Anthony Thomas, LITRG Chairman, said:

“More serious thought needs to be put into the mooted obligatory use of financial advisers to access the secondary annuity market. Many people on low incomes may not be able to afford such financial advice even if they want to benefit from such a market. We must be very careful that we are not denying those of modest means the benefits of the greater freedom on pensions.

“We strongly urge the Government to consult carefully on what sort of advice is most suitable for those with small annuities, to prevent large numbers on low incomes being unfairly excluded from the secondary annuities market. Some form of exclusion from obligatory financial advice for small pension sums should be looked at.  There should be provision in the proposed new public financial guidance service for free advice on how to shop around for the best deal and also for clear warnings on the predatory activities of scammers, ever alert to separating the unwary from their money.”

LITRG also told the Government1 that legislation should be widened to include all pre-pensions reform annuities, regardless of type – to take account of old-style contracts and old obscure pensions schemes - and that all payments should be made to the person to whom they would have been made had the annuity not been sold on.

Anthony Thomas said:

“We are pleased that the Government is attempting to level the playing field between pre-and post-pensions freedom annuitants because it promotes equality of opportunity and outcome. We particularly welcome the Government’s relaxation of its stance on buyback by original annuity providers, since for those with small annuities, this may be the only route available.”

Notes for editors

1.       LITRG’s recent submission to the Government can be read here.


2.       Low Incomes Tax Reform Group


The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)

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