Annuity U-turn: what the pundits say
No escape
Government ministers are regularly accused of “trying to buy the grey vote”, said Becky Barrow in The Sunday Times. Not this time. The Treasury has ripped up plans to allow millions of pensioners, who bought annuities before the introduction of pension freedoms, to sell their policies for a cash sum. The scheme – a baby of the former chancellor, George Osborne – was touted as a lifeline for elderly savers locked into lifetime annuity deals paying derisory annual incomes. The Treasury now says that it can’t balance the creation of an “effective” secondary market for annuities “with making sure consumers are protected”. How “utterly exasperating” for some five million annuity-holders who got “a rubbish deal and now cannot escape it”.
The threat of rip-offs
This is actually one Government U-turn we should welcome, said Anne Ashworth in The Times. Despite general agreement that, given dramatically lower rates, ending the requirement to buy an annuity has been a boon, there was a sizeable risk that allowing existing holders to sell their annuities would lead to the “financially unsophisticated” being ripped off for a second time by unscrupulous buyers. “Private equity funds, which are scouring the globe for any kind of investment offering a yield, were said to be interested in acquiring unwanted annuities. I think we can guess why.”
Rip it up
The underlying problem, surely, is that “annuities don’t work” at today’s “silly interest rates”, which imply that “a pound in a decade hence is worth almost as much as a pound today”, said Neil Collins in the FT. And blame for that lies with the Bank of England’s “financial repression”. Yet many in the industry argue that the concept of a “secondary market for annuities” was always flawed, said Katie Morley in The Daily Telegraph. Several insurance giants, including Standard Life, Royal London, LV= and Aegon, had refused to take part. Even so, there’s an interesting political aspect to the turnaround, said Tom Mcphail of Hargreaves Lansdown. It’s just one of a growing number of George Osborne’s policies to be killed by Theresa May’s Government, which is increasingly “pursuing its own agenda”. What next, we wonder.