Plans to allow retired savers to sell their retirement annuities have been shelved by the Government.
Under the proposals, from April 2017 people would have been able to sell their annuities – a regular guaranteed payment from a pension pot – to insurers in return for a cash lump sum.
But the Treasury has said it's decided not to continue with the plans. It says it's unwilling to allow a market to develop which could have resulted in consumers being financially worse off, for example if they received poor cash value in exchange for their annuity income or suffered higher costs.
The Treasury made the decision after speaking to the industry, regulators and consumer groups.
The Government previously said the planned move would open up new freedoms to around five million people who currently have an annuity, as well as future annuity holders.
It would have offered people who already hold an annuity similar freedoms to those approaching retirement, who are no longer required to buy an annuity with their pension pot following a pensions overhaul launched in April 2015. These freedoms gave access to pension money to those heading into retirement but did not apply to people already locked into an annuity.
While many firms had shown they were willing to allow customers to sell their annuities, the Treasury added, it was clear that there would not be enough buyers to create a competitive market.
What does the Treasury say?
Simon Kirby, Economic Secretary to the Treasury, says: "Allowing consumers to sell on their annuity income was always dependent on balancing the creation of an effective market with making sure consumers are properly protected."It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited.
"Pursuing this policy in these circumstances would put consumers at risk – this is something that I am not prepared to do."
The Government said it had always been clear that for the majority of people, keeping their annuity incomes would be their best option.
Tom McPhail, head of retirement policy at wealth manager Hargreaves Lansdown, says: "This will no doubt come as a disappointment to some annuity holders who were looking forward to restructuring their retirement income. However, it is the right decision. The risks to the vast majority of annuity holders outweigh the benefits for the small minority who could benefit."