6th September 2016
The UK’s largest annuity broker Hargreaves Lansdown says it will not offer a broking service for investors to sell their annuities because of the potential risk to consumers. The firm says its decision has been made after extensive analysis of the market and potential risks to consumers.
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.”
The regulator the Financial Conduct Authority has issued a consultation focusing on the government-backed guidance service Pension Wise and how it will support annuity holders who may want to sell their income in exchange for a cash lump sum.
McPhail adds: “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.”
Risks to investors
Hargreaves Lansdown has set out a number of risks faced by investors contemplating selling their existing annuity: