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Bob Cook
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The ability to sell your annuity is to end up becoming law
On today's Andrew Marr Show (Sunday 15th March 2015) Chancellor George Osborne appeared to validate what has actually long been thought, that the Government are going to pave the way to permit individuals who currently own an annuity to be able to trade it in for a cash lump sum.

This will be excelent news for some pensioners who may have the ability to make better use of a lump sum than a little regular income, although that income will be paid for the rest of their life. It might be even better news for the Government as we believe they will gain from a tax windfall. Similar to all pension plans, any amount taken after the preliminary 25 % tax free lump sum, will be liable to earnings tax. People currently in an annuity will have previously taken their tax free cash, or decided to forgo one. This means that It is possible that a lump sum payment from a traded annuity could push the pensioner into the 40 % tax band, and potentially higher.

Presently if asked by a consumer "when will I be able to cash in my annuity" our response has been that regulations will not be passed (and products created) till April 2016. Mr Osborne's comments today appeared to confirm this. This is certainly exciting news, but there are a number of risks and concerns that go with it.

Of most disquiet to us, and market experts, are the responses regularly offered to questions about exactly what happens if an individual blows all their pension fund in one go then finds themselves with no income in what could be a very long period of retirement. Andrew Marr once more pursued this concern today. The Chancellor's response was typical of responses formerly provided by himself and other ministers - he implied that he thought such a mind-set was rather patronising and stated that individuals could be 'trusted' to utilise their pension pots sensibly.

The pension freedoms announced last year unquestionably caused much enjoyment and there are many clients who plan to take a huge lump sum, if not all of their pension fund, in one go as soon as the new fiscal year starts. Even if the large majority make economically sound decisions there will certainly be some who will come to regret the option.

As an internet business, our approach is to provide customers with all the information they want to enable them to make an informed choice. As we offer an UK wide service it is not possible for us to make an individual recommendation to consumers who we may never talk to. We will provide our customers with a non-advised service where they comprehend and accept that the decision to offer the annuity for a cash lump sum is totally theirs.

It is rather ironic that the statement allowing people to cash in their annuity was made in the same weekend when the media was likewise reporting that the regulator, The Financial Conduct Authority, has extremely important concerns that numerous consumers who did buy an annuity might not have got the best deal. With the risk of future compensation claims, it could be that some annuity providers may be eager to buy their way-out of annuity agreements they consider might have end up as the subject of a complaint. Nevertheless it is extremely questionable if such a deal is likely to be in the best interests of the client.

There have actually been previous examples of governments blowing the trumpet signalling brand new benefits for individuals, for those benefits to be proved somewhat tentative a few years later. The announcement by the Thatcher government that people could contract out of the Second State Pension and their occupational pensions in favour of having the contributions paid straight into a personal pension in their name, fostered a substantial client requirement. Undoubtedly lots of customers independently opted to do this and sought a company to help them achieve it. Nevertheless when it was consequently shown that the customer would have been better off staying with their old pensions, it was the financial advisers and insurance coverage business who picked up the bill - in a lot of cases unjustly. We did not have any such concerns in our company, but we have considered what could occur with this latest announcement.

Many advisors will bear in mind the contracting out problem and therefore they might be reluctant to provide any recommendations whatsoever that suggests that a client would be better off selling their annuity. In effect they will state "do not do it, but if you wish to, I’ll get you an application form "!!. All consumers should bear in mind the age old principle 'caveat emptor' advocating 'buyer beware'.
Please don't believe we are against these changes, we are not. There would not be much point in running an internet site offering the service. However we are eager to make consumers aware of the risks which they will have to face in making the decision for themselves. For some clients cashing in their annuity, will certainly be an advantage, for others a potential error. It is essential that the consumer comprehends that, with the market being captured in the middle of the Government's brand-new modifications and what has previously been considered 'best advice", financial advisers may be really uncomfortable providing conclusive guidance in this area. The consumer will have no one else to blame if they do make a bad choice aside from themselves.

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Will the March 2015 Budget Announcement give the green light to sell your annuity?

Pensions Minister Steve Webb has made it known that he desires consumers who have previously purchased an annuity to have the capability to offer it in exchange for a cash lump sum. In light of the Chancellor's dramatic pension statement at the 2014 Budget Statement, he might take this opportunity to reveal changes which many annuity consumers could welcome.

You would need to be substantially lacking in cynicism if you think that the Government will not make use of next week's budget statement to make policies that they think will certainly earn them individuals' votes at the May General Election !!

The biggest, most dramatic and certainly unanticipated modification announced in 2013 revolved around the removal of income caps on pension funds, allowing pensioners to drawdown as much or as little as they desire from their pension fund. While these changes have pleased many, some individuals who had already purchased an annuity or who were members of final salary pension plans, felt that these new 'liberties' didn't extend to them. The Government have been looking at methods to address this.

In January 2015, Steve Webb went public with his strategies to permit people to cash in their annuity for a one off lump sum amount, declaring that annuity customers around the country were 'urging' him to make this modification. Making such a statement four months before the General Election suggests that if he is sincere, he had better get a shift on! With this in mind, many think that the forthcoming budget statement will start the procedure of making these changes legal.

It ought to be kept in mind that even if the changes are declared in the budget statement next week, it could still be many months, if not longer, before customers get the possibility to take benefit of the changes. It will certainly be the best part of a year or more before to the bill is finally given Royal Assent - the moment it becomes law.
Even if products do appear, it is doubtful whether the real products offered will be as appealing as the initial concept. While we could be entirely wrong we believe the following are likely to be features of a traded annuity market:

Initially we do not believe that there will be any obligation on existing annuity service providers to reimburse or return any part of the cash they originally got from the consumer when they initially bought their annuity. Having said that, lots of existing annuity companies may desire to do this to minimize their financial exposure of the client living longer than anticipated and thereby minimising their profitability. The customer may likewise get more cash if, instead of dealing with their existing annuity provider, they offer their regular income to a new company who will provide them an immediate lump sum payment.

Consumers will most likely have to sell at a reduced rate. As a very basic example, a pensioner with a life of expectancy of 10 years who got a gross (before tax) annuity income of £5,000 per annum, would receive £50,000 if they lived for precisely 10 years. Anticipating the customer will live for 10 years, the client might be offered say £40,000 in exchange for the regular annuity income. The client is foregoing a potential £10,000 in the future for a guaranteed £40,000 now.
This could imply that if the consumer passes away after 2 years, the company who bought the annuity earnings will be significantly out of pocket - as they would no longer have the ability to get the annuity income. They have paid 8 years earnings in advance, however they have just received 2 years income in return.

Nevertheless if the consumer continues to live for 15 years, or more, the business will earn more than expected from the arrangement. Furthermore there may not be any commitment on the provider to share this additional income with the initial customer.

In all agreements that are based upon a consumer's life expectancy there will be winners and losers, nevertheless who the winners are will not be known up until the customer dies!

The customer will also be required to pay income tax on the lump sum they receive. We cannot see how this will not hold true.
In the example above, a consumer selling their annuity for £40,000 will have the sum further reduced by tax. Based on 2014/ 2015 tax rates we presently believe that a client aged under 65 would have almost £6,000 to pay in tax *. This amount would be even more if the client has other earnings.

We need to stress that the assumptions above are pure speculation, but we don't think there are too many who would disagree with us at this phase. Product suppliers will undoubtedly have to work hard to deliver appealing policies.

As a customer focused business, our main aim is that clients attain outcomes that are suitable for them. It is for that reason crucial that we continue to make you conscious of the fact that while an instant lump sum may be extremely useful and appealing, once it is gone that is it. An annuity on the other hand will remain to pay you a regular income for your entire life, even if you die several years after your original life expectancy - we hope you do.


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Many people are excited about the new pension rules due to start next April – we are too !! However we are very concerned that many people will contribute in giving millions of pounds back to the tax man, when in many cases they need pay no tax at all. See our latest article.

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While many people are excited about the proposals that will allow you to take all of your pension fund as a lump sum, many are overlooking the fact that if they do take their fund this way they will have to pay tax on 75% of it. This tax could be as high as 40% or even 45%.

Wouldn't it be great if you could create a second (or even third) Tax Free Pension Lump Sum from the same money. Well you always have been able to do this, and the new pension legislation if it remains unaltered will make this even easier. To find out more visit :

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Your options if you need an income now (March 2014)

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Income Drawdown is a flexible product that combines the features of a pension savings plan, and also allows you to take benefits after the age of 55. Some customers may be able to do far more with Drawdown than they could an ordinary annuity

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Just made some changes to our pension Lump sum calculator page.

It includes the recent budget announcement changes and will tell you exactly how much you can take from your pension fund as a lump Sum - You may be able to take all of it.

Its easy to use and can be found at :

Please take a moment to give it a visit and tell us what you think

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Bob Cook commented on a video on YouTube.
Should have given credit to for unauthorised use of their graphic
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