However, the "new" government has now announced that this will not go ahead, and for the vast majority of people this is a good outcome.
The government has cancelled its plans for a variety of reasons, but principally because "there will be insufficient purchasers to create a competitive market", that this "would undermine other consumer protections", and that "we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited."
This seems an eminently sensible conclusion.
There are several groups of annuity holders for whom the ability to sell their annuity may have been superficially attractive, including:
those who had bought "poor value" annuities, perhaps because they had health issues at the time that were not taken account of, or who have subsequently developed health issues
those where the annuity payment each month or year is so minimal (because the original pension pot was small) that a lump sum would have more utility/value
those who do not necessarily need the income from their annuity and would rather have a lump sum to spend otherwise, or to pass on to their family on their death
It therefore was right for the government to consider allowing the sale of annuities but, as noted above, there was little demand from those that might actually purchase these annuities and this low demand would likely lead to very poor value for annuity sellers. The government could have chosen to reduce consumer protections in order to encourage more "purchasers", and therefore to grow the market, but this would have rightly been unacceptable.
The government had estimated that no more than 5% of annuity holders would take advantage of the ability to sell, and even within that group it would be arguable whether it was actually the correct decision for most. For the 3 groups listed above:
Any annuity holder with health issues now would have received a reduced amount for their annuity when sold (due to their shortened life expectancy). Selling now would simply compound, rather than unwind, the poor value of any previous annuity purchase
For small annuities, the likely costs associated with the sale would have been prohibitive
Those who would rather have a lump sum to pass on can perhaps consider themselves disappointed that the proposals are not going ahead, though an alternative may be, for those in good enough health, to use the annuity income (assuming it really is excess to requirements) to fund a life assurance policy which will provide a lump sum on death. Please let us know if you would like to discuss this further.
And finally, spare a thought for all the civil servants who've spent the last 18 months drafting consultation documents, collating responses, and even drafting legislation.
For those who haven't yet bought an annuity, don't ignore them as you approach retirement, though the pension freedoms do give you more flexibility. Please get in touch if we can help you navigate the myriad of options ahead of you.