The Treasury has announced that it has cancelled its plans to create a secondary annuities market due to concerns over consumer protection.

It said that after an extensive programme of engagement with the industry, financial regulators and consumer groups, the government has decided not to take forward plans to introduce a secondary annuities market because the consumer protections required could undermine the market’s development.

The secondary annuities market was due to launch in April 2017 and would have allowed individuals to sell their annuity income without the tax restrictions that currently apply.

The Treasury said that it has become clear that creating the conditions to allow a vibrant and competitive market to emerge, with multiple buyers and sellers of annuities, could not be balanced with sufficient consumer protections.

In particular, the government is concerned that there will not be enough purchasers of annuities to create a competitive market, despite many firms showing willingness to allow their customers to sell their annuities. Therefore, the Treasury said it has become clear that the steps the government would need to take to create purchasing demand in the market would undermine other consumer protections.

“Consumer protection is a top priority for the government and we are not willing to allow a market to develop which could produce poor outcomes for consumers, such as receiving poor value for their annuity income stream and suffering higher costs”, the Treasury said.

Commenting on the announcement Economic Secretary to the Treasury Simon Kirby said: “Allowing consumers to sell on their annuity income was always dependent on balancing the creation of an effective market with making sure consumers are properly protected. It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited. Pursuing this policy in these circumstances would put consumers at risk – this is something that I am not prepared to do.”

The Treasury said that the government has always been clear that for the majority of people keeping their annuity incomes will be their best option, estimating that only 5 per cent of people who currently hold an annuity would take advantage of this reform.

The announcement follows a consultation by the Financial Conduct Authority, which closed on 4 October, on proposed changes to the standards applied to Pension Wise's designated guidance providers in order to include guidance on the secondary annuities market. The government had intended to allow those considering selling their annuity access to Pension Wise.

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