5m face pensions blow after rip-off annuities U-turn

FIVE million pensioners have been robbed of the chance to cash in their rip-off annuities.

They had been promised the right to swap them for a lump sum under George Osborne’s pension reforms.

But Treasury officials announced last night that the plans had been scrapped.

The U-turn is a huge blow to older savers who were forced to convert their retirement savings into annuities. They can no longer hope to escape the often poor-value deals.

Ministers say they acted to stop pensioners being exploited – they were facing fees of up to 20 per cent for cashing in.

But campaigners accused the Government of breaking its promises and leaving millions in the lurch.

‘This is going to be really disappointing for all those people who have desperately wanted to get rid of annuities which they were forced to buy and which were often not sold properly to them in the first place,’ said Ros Altmann, a former pensions minister.

‘Now these savers will be stuck with these deals for life. The Government got their hopes up and many people will be very upset.’

Bought by workers with their pension funds when they retire, annuities pay a regular income for life. Many produce meagre returns. Under pension freedoms introduced in April last year, savers reaching retirement were told they no longer had to buy an annuity with their pension pots – and could instead spend the money as they liked.

But the reforms excluded those who had already bought an annuity. Some had only small pension pots and received little income. Others were victims of mis-selling.

Ministers announced a few months later that the freedoms would be extended to these five million annuity holders from next April. That raised hopes that a second-hand annuities market would spring up to throw them a lump sum lifeline.

But insurers have proved reluctant to buy back the annuities – with as few as two in ten major players saying they intended to do so. For their part, savers faced handin ing over thousands of pounds for financial advice.

The Treasury said it was scrapping the policy because so few firms had signed up and that savers risked being stuck with poor deals. It claimed only a small proportion of pensioners would have cashed in.

‘It has become clear that we cannot guarantee consumers will get good value for money a market that is likely to be small and limited,’ said Simon Kirby, Tory economic secretary to the Treasury. ‘Pursuing this policy in these circumstances would put consumers at risk – this is something that I am not prepared to do.’

But Billy Burrows, an independent pensions expert, said: ‘This is one in the eye for people who missed out on the freedoms but were promised they could cash in their pension pots.

‘They may have had plans to spend that money but have had the rug pulled under their feet by the Government. There has been huge interest in this from savers and it’s really poor form to U-turn on these changes just a few months before they were supposed to come into force.’ The climbdown comes despite Theresa May telling her party conference this month she wanted to intervene in the market if she felt consumers were losing out.

Retired engineer Norman Webster, 70, from Sussex, took out a deal that pays just £100 a month a decade ago. He believes he could have received a higher payout and had hoped to swap it for a lump sum under the new rules. He said: ‘It is really poor from the Government to backtrack like this. They told us we would be able to take our pensions as cash but now they have broken their promises.’

‘Rug pulled under their feet’