Pensions cash-in block hits classic investment
Pensioners will have to go without cashing in their annuity to invest in a classic car as the Government has scrapped plans to allow the practice.
A Life Annuity is a retirement income plan that can be bought with savings, investments, inheritance or with a taxfree cash lump sum from a pension fund.
The conversion of a pension income into an annuity used to be compulsory by the age of 75 until new legislation was introduced in April 2011.
The ‘secondary annuity market’ was due to start in April 2017, giving pensioners locked into low pay-out rates the chance to escape their policies and raise cash to invest elsewhere, like classic cars. However, the Treasury has now said it is too risky due to lack of competition in the insurance market to buy and sell the annuities.
Simon Kirby, the economic secretary to the Treasury, says: ‘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.’
Arwel Richards, Silverstone Auctions classic car specialist, says: ‘A number of cars at each sale form part of a vendor’s pension and retirement plan. A Jaguar E-type coming from long-term ownership will naturally enter the market because the owner has reached the point where maintaining and getting in and out of it has become a chore.
‘Naturally the values have risen and the vendor expects a healthy sum to be achieved at auction for the car.’
Richards says there had been no marked uptick in investment from new buyers due to the annuity announcement. He adds: ‘ The last thing the 2016 classic car market needs is scores of misinformed buyers entering the sector hoping to see a profit on a classic car purchase.
‘ This, by and large, hasn’t happened. We do have buyers who treat their cars as part of an investment portfolio but we would prefer, first and foremost, to sell cars for, and to, true classic enthusiasts.’
Pensioners like Anne and Bev Gittins, pictured in their Triumph Vitesse, will no longer be able to cash in their annuity to invest in a classic.