The United Kingdom will allow people an option to cash in their pension annuity from April 2017. It follows another shake-up in retirement procurement.
CASHING IN PENSION ANNUITIES: The requirement to buy an annuity has already ended in Britain.
There has been a further shake-up in pension regulations.
It means individuals will no longer be required to keep their cash in a pot as an annuity for retirement. Thus, producing a regular wage until death.
Britain's Finance Minister had previously reported his aim. He wanted to make an auxiliary business sector for some 6 million annuities. They were already purchased and paying out dividends.
The draft law empowering this to happen adds further restrictions for buyers and brokers. They must operate while regulated by the Financial Conduct Authority (FCA).
It's expected that around 300,000 consumers will take up the alternative of cashing in their pension annuities. This could occur as a result of the changes to pension regulations beginning in April 2017.
The Financial Conduct Authority issued their position on how they would adopt the rules. It would be a secondary market to protect those who sell their annuities. One of the main aims is to protect them against pension scamming in the United Kingdom.
It is already 'technically' possible for individuals to sell their annuities. But, punitive tax laws impinge this system. As a result of tax changes from April 2017, the expectations are for the market to grow - 'significantly'.
"We have set out proposed rules and guidance today. They will help ensure that consumers have an appropriate degree of protection. This is important should they decide to sell their annuity income.
The FCA has proposed that brokers must set out their charges up front. They must agree them with consumers selling pension annuities. This differs from getting paid commission from firms acting as buyers."
The most likely institutions to buy annuities would be investment firms or insurers. They would be most interested in the regular income stream that pension annuities provide.
There is even better news for consumers. The Financial Services Compensation Scheme will regulate financial institutions operating in this market.
The result should mean that companies selling pension annuities would need to search for the best price. That process should avoid the consumer being ill-informed or getting ripped off.
The pension shake-up also means that individuals would have financial redress. That helps to avoid any of the pension rules and regulations getting breached.
Fiduciary Duty Rules: No law amendment or clear decision on the fiduciary duties of Pension Trustees.
Pension Pot Rules: Sweeping new rule changes for small pension pots mean increased freedom.
Pension Scams: Bans will now include the use of emails and texts in private pensions cold calling.
Pension Shake-up allows Selling of Annuities from 2017 in the United Kingdom