Advisers
For such a complex market, and with advice compulsory in some cases, advisers could undoubtedly add real value, but will it prove attractive to advisers in general? Payments for advice will be through adviser charging.
Assigning an annuity means giving up a guaranteed income for life, with clear parallels with defined benefit to defined contribution transfers. There are also similarities to equity release, which involves cashing in existing assets.
The FCA requires additional qualifications in these fields, but will not for the secondary annuity market. But the real question for advisers is whether they want to offer their services in a new and untested field with a disproportionately elderly or vulnerable customer base, with the potential for more than its fair share of insistent customers. Those who do could find themselves in demand.
Even if not actively seeking to advise in this market, many advisers may find they have customers with a deferred annuity as part of their retirement provision.
In a surprise move, HMRC confirmed these too can be offered up to third-party buyers where the individual is aged over 55 even if the annuity has not yet come into payment. This adds another layer of complexity, not least in arriving at a fair price, but may need to be part of broader advice on retirement options.
Steven Cameron is pensions director at Aegon UK
