Selling an annuity will be very different from not taking one. 

In today’s consultation document -  Creating a secondary annuity market - there are a number of specific items about the benefits impact which are very different from those applying to people with an unused pension pot.

The biggest one is the announcement that:

“In order to protect the taxpayer, the government does not intend to compensate individuals through welfare for any loss of income resulting from assigning their annuity to a third party and would therefore like to consider whether those receiving means-tested benefits should be able to do so.”

This removes much of the potential win-win of the earlier proposals, where benefit entitlement would be available, as long as that was not a primary motive for the sale.

This is different from the situation of an untaken pot where the intention is still that, at least for those under state pension age, the value of the pot is ignored and only sums taken from it will count.  Taking capital that does not exceed the lower benefit limit will have no effect on entitlement.

There may still be a number of circumstances where selling an annuity will make sense for people on benefits.  I’m also interested in seeing the detail of the regulations around this; there may need to be complex diminution of capital assessments that will need to carried out.

It certainly suggests that the Pension Wise service will need to get involved in some more detailed calculations than seem to be the current intention.  I have commented on those intentions in a note on my blog.

You can see the note at http://blog.cix.co.uk/gmorgan