Insurers plead with Government to reverse annuity buy-back ban
Insurers are calling on the Government to reverse its decision to ban them from bidding to buy back their own annuities.
Senior figures from several insurance companies claim that people who sell their annuities will lose out unless the Government does a u-turn on its plan.
In the Budget two months ago, Chancellor George Osborne launched a consultation on creating a secondary annuity market to allow pensioners to either swap their contracts for cash or move into drawdown.
But the Treasury ruled out allowing purchases by the original annuity provider, citing the risk of insurers exploiting a “captive market” and the potential impact on insurers’ solvency.
But Legal & General’s managing director of individual retirement Bernie Hickman said that by excluding original providers, customers are likely to get a worse deal.
“All things being equal, we should be able to pay slightly more than everyone else and therefore the right outcome is to ensure you have a competitive marketplace.Legal & General’s managing director of individual retirement Bernie Hickman
Mr Hickman added: “We will be pushing the Government back on this as I don’t think a decision that the provider of the annuity can’t bid is a good customer outcome.
“All things being equal, we should be able to pay slightly more than everyone else and therefore the right outcome is to ensure you have a competitive marketplace.
“But to do that, you need to allow a person who can bid the most to do so.”
Meanwhile, Scottish Widows’ head of pensions market development Ian Naismith and Standard Life’s head of pension’s strategy Jamie Jenkins both agreed that original providers are well-placed to boost offers, particularly for small pots with fixed overheads.
But Mr Jenkins warned that allowing providers to buy back annuities would result in the Government entering “new territory” by enabling insurers to rip up contracts, rather than reassigning them.
Finally, MGM Advantage’s pensions technical director Andrew Tully claimed that safeguards, such as “blind” bidding, would need to be introduced to ensure that people intent on selling their annuity would shop around for the best prices, rather than defaulting to existing providers.