The pen­sion­ers stuck with an­nu­ities pay­ing as lit­tle as £1.26 a week

The Sunday Telegraph - Money & Business - - Money - Tele­graph Money Sam Brod­beck

Three years on from a Govern­ment prom­ise to let peo­ple cash in an­nu­ities, mil­lions of pen­sion­ers are still lan­guish­ing on con­tracts, some of which pay as lit­tle as £1.26 a week.

For­mer chan­cel­lor George Os­borne said five mil­lion peo­ple with an­nu­ities would be able to sell them for cash. How­ever, the Govern­ment scrapped the plan in Oc­to­ber 2016, cit­ing fears it would “put con­sumers at risk” of poor deals.

Now a cam­paign group has urged Chan­cel­lor Philip Ham­mond to use this month’s Bud­get to help those pen­sion­ers stuck with poli­cies pay­ing tiny in­comes that, if un­locked, could make a real dif­fer­ence to their lives.

Ex­perts had pre­dicted an an­nu­ity pay­ing a healthy 60-year-old £1,000 a year might be swapped for as much as £16,000.

has been inundated with emails from read­ers stuck with tiny an­nu­ities bought be­fore April 2015 when the “pen­sion free­doms” re­forms in­tro­duced meant you could cash in your pen­sion.

Elaine Ed­wards, 63, said she voted for the Con­ser­va­tives for the first time as a re­sult of Mr Os­borne’s prom­ise. “In 2013 I bought three an­nu­ities with my £32,000 pen­sion sav­ings. One only pays me £4.90 a month,” she said. “These tiny an­nu­ities are out­ra­geous. You’ve built up the pen­sion, it’s damn well yours, you should be able to spend it how you like.”

Sev­enty-year-old Joseph Earp is still try­ing to pay off a loan that the bank only ap­proved be­cause he had planned to cash in his an­nu­ity to clear the debt.

He said: “When I heard the re­stric­tions were go­ing to be lifted I went to the bank and showed them the an­nu­ity I was go­ing to sell and they hap­pily lent me £6,000 to pay for my daugh­ter’s wed­ding.”

Mr Earp com­plained to Stan­dard Life, his an­nu­ity provider, but the firm said there was noth­ing it could do. “The pro­posal was never in­tro­duced and the law has never changed,” it said. “This isn’t Stan­dard Life’s fault.” Aside from pay­ing piti­ful in­comes, most an­nu­ities are sold on a “sin­gle life” ba­sis, mean­ing they stop pay­ing out once the cus­tomer dies. Money left in a pen­sion, on the other hand, passes on free of in­her­i­tance tax and, in many cases, in­come tax too.

Ross White­head, 56, re­ceives £60 a month from an an­nu­ity he bought in 2011. He took his pen­sion early be­cause both his fa­ther and grand­fa­ther died young and he wanted to make the most of his sav­ings in case the same hap­pened to him.

His part­ner, who took her pen­sion af­ter the free­doms took ef­fect, used the new rules to cash in her pot and buy two prop­er­ties. The rental in­come from the prop­er­ties ex­ceeds £1,000 a month.

Mr White­head said: “I also wanted to buy a prop­erty. Af­ter I took the pen­sion out and re­alised it was an an­nu­ity I tried to re­verse it, but it was too late.

“When I have to re­tire even­tu­ally I’ll be on hard times, even with the state pen­sion in­come. It’s not what I an­tic­i­pated.”

A lit­tle-known-rule – re­lated to the 2004 Fi­nance Act – does give some pen­sion­ers the right to cash in an­nu­ities of £10,000 or less. How­ever, in­sur­ers have been re­luc­tant to let cus­tomers use this op­tion, ar­gu­ing that they would need to re­write con­tracts and that it would not be in cus­tomers’ best in­ter­ests.

One reader is still pay­ing off a loan he took out to pay for his daugh­ter’s wed­ding

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