At last!! Thousands win their pension freedom

Money Mail has long lobbied for pensioners locked into paltry annuities to be allowed access to their retirement pots. Now, at last, 75 ,000 savers CAN cash in...

MORE than 45,000 pensioners have broken free from poorpaying annuities and taken their savings back.

Money Mail has campaigned for years on behalf of retirees who were forced to buy trivial annuities, rather than take their pension as a meaningful lump sum.

But whether or not you can claim your pension back depends on the company who pays it — some firms still refuse to let customers cash in.

In all, 75,000 pensioners have now been offered lump sums for their annuities since we launched our campaign.

Rothesay Life, the nation’s third largest annuity provider, has written to 50,000 policyholders to offer them the chance to swap their income for a one- off lump sum. More than 30,000 have accepted so far, and the firm says it will write to a further 30,000 before the end of the year.

Insurer Phoenix Life has revealed that around 15,000 people have taken up its offer to cash in.

Annuities give a guaranteed income for life in exchange for a pension pot. Income depends on the size of your savings and your life expectancy.

Before 2015, those approaching retirement had to buy an annuity, no matter how small their pot. Some pensioners were left with policies paying as little as 63p a year. But the pension freedoms let people do what they want with their pots from 55.

Money Mail launched its ‘Unlock Our Pensions’ campaign three years ago to allow retirees trapped in paltry paying annuities to take out a lump sum instead.

Rothesay bought 200,000 annuities from Aegon and Zurich Life in 2017. It is these policyholders who are being offered a chance to cash in providing they are eligible.

To qualify for the lump sum offer, policyholders must be under 85 and their annuity cannot be worth more than £10,000.

Rothesay prices its offer by calculating how much it would cost to meet your current annuity payments, based on the life expectancy of an average policyholder your age.

In a letter seen by Money Mail, the firm offered one 83-year-old man around £7,250 in exchange for his £1,029 annual annuity income.

In its booklet, Rothesay warns customers they are ‘highly unlikely’ to get a better annuity rate if they use the cash to buy another one. The lump-sum payment could also be subject to income tax.

Rothesay is currently appealing a court ruling against its £12 billion buy-out of 400,000 annuities from insurance giant Prudential. If it wins, annuity customers currently with The Pru could one day be made the same offer.

A Rothesay spokesman says its customers with small pots were all offered a lump sum on retirement, adding: ‘It seems natural to extend this option to those forced to purchase smaller annuities before they transferred to us.’

Phoenix made the offer to 25,000 customers with pots worth £2,000 or less, and more than 60 pc took the lump sum. A spokesman says: ‘Both the initial and reminder letters make it very clear there is no obligation to accept our offer, and we highlight that they can seek advice if they are unsure

about the offer.’ Graham Parry wants to cash in two annuities he had to buy with Prudential when he retired from Rolls-Royce in 2014. His £7,200 savings pay £169.42 a year after tax, but the firm has refused to let him take a lump sum. The 66-year-old from Bristol says: ‘People should have the option to decide our own future.’ Former pensions minister Baroness Ros Altmann says annuity firms should let customers make an ‘informed choice’. But she wants official guidelines and checks from the regulator to ensure customers are not

exploited, and adds: ‘I am really concerned people were ripped off on the way in and could be ripped off on the way out.’ In 2016, the Government abandoned plans for a secondary annuity market that would have let pensioners sell their annuity to another firm for a lump sum. Existing legislation lets annuity firms buy out policyholders with pots under £10,000. Despite this, most insurers told Money Mail they would not allow customers to cash in their annuity. Standard Life says: ‘This is something we are reviewing for the future.’ Legal & General says the process would need a framework to ensure a ‘fair outcome for all customers’.

Other firms refused to budge. The Pru says swapping an annuity for a lump sum posed a ‘high risk of poor outcomes’.

An Aviva spokesman says: ‘Without an agreed regulatory framework, there is increased risk to the customer that they may not make an informed decision.’

Scottish Widows, LV= and Royal London do not consider it either — and fear customers would not get good deals for their annuities.