LONDON (Reuters) - Britain cancelled a plan to create a secondary market for annuities on Tuesday, dismantling a key part of former Chancellor George Osborne’s drive to give pensioners freedom to choose how to invest their pension pots.
Last year, Osborne announced pensioners would no longer have to buy an annuity, or an income stream for life, with their pension savings. Instead, they would be able to buy more flexible retirement products or take their savings in cash.
The plans involved creating a market into which pensioners could sell their annuities, but consumer groups warned that retirees risked squandering their savings, or falling prey to scams.
The finance ministry agreed on Tuesday that making a secondary market for annuities would pose risks to pensioners, and added that it was clear there would not be enough purchasers to create a competitive market.
“This is the right decision for the right reasons,” said Rob Yuille, head of retirement at the Association of British Insurers. “The industry has consistently supported the freedom and choice reforms, but we agree with the government that the secondary annuity market came with considerable risks for customers, including from unregulated buyers.”
Tuesday’s decision put further distance between the economic policies of the new government under Prime Minister Theresa May, and those of predecessor David Cameron. May’s Chancellor Philip Hammond is due to outline his own fiscal plans on Nov. 23.
“The pension freedoms were George Osborne’s baby. The secondary annuity market concept was enthusiastically supported by the two most recent pensions ministers,” said Tom McPhail, head of retirement policy at investment firm Hargreaves Lansdown.
“The fact that it has now been dropped could be indicative of a new government which is progressively shedding the legacy policies of the Cameron/Osborne era and is increasingly pursuing its own agenda.”
Reporting by Andy Bruce and Carolyn Cohn,; editing by William Schomberg/Mark Heinrich