The UK’s biggest broker says it will not be a player in the secondary annuity market, as the FCA launches a consultation on how Pension Wise will interact with annuity resale.
Hargreaves Lansdown says it will not participate as a broker in the secondary annuity market the Government is promoting for launch next year, citing concerns over investor protection and low demand. It says longevity risk, difficulty in assessing value for money, fraud and choice will make the market a complex one to nagivate.
Hargreaves says it may transact in the secondary market on an advisory basis but says an extensive analysis of the secondary annuity market and the potential risks to consumers means it will not be offering an execution-only service.
The Treasury has said annuity holders with income above a certain value will have to pay for advice before they can sell their annuity, but it has yet to set the threshold.
Hargreaves Lansdown head of retirement policy Tom McPhail says: “Like the government, we are keen to see as many investors as possible taking on both the freedom and the responsibility to manage their own retirement savings. For a small number of investors, selling an existing annuity income in exchange for a lump sum may make sense. However ever since this proposal was first made, we have been concerned that for many investors, it is likely to be a poor decision. We have therefore made the decision not to enter the secondary annuity market at this time.
“We are reviewing whether Hargreaves Lansdown will offer an advisory service to investors who may be contemplating selling their annuity and who are looking for an advisor to consult on the decision. We will make a further announcement once we have reviewed the full regulatory and operational considerations involved in this market.
“For anyone not paying for advice before selling an annuity, a consultation with Pension Wise should be mandatory. The particular risks in this market are such that an independent sense-check from either a qualified adviser or from Pension Wise is a small inconvenience for the small number of investors who are likely to go ahead with such a transaction.”