17th October 2014
Pensions minister Steve Webb wants to allow those who retired before the new pension freedoms were announced to ‘unwind’ their annuities.
Typically annuities are non-refundable, once a pension pot has been handed over there is no way of reversing the decision, but Webb wants to change that to allow those who have already retired to take advantage of new pension freedoms, which include taking an entire pension pot as cash.
Speaking at the National Association of Pension Funds annual conference, Webb (pictured) said the view was personal and not that of the government.
‘What about the people who have already locked into an annuity?’ he asked. ‘They’re feeling rather bitter that they came just the wrong side of the line. Now I don’t believe this government will change that this side of the election, but it’s something that’s gnawing away at the back of my mind, and things that gnaw away at the back of my mind sometimes go a bit further.’
He added that he would like to ‘enable the unwinding of some of those annuities as well, so that more people can share in that freedom’.
The ability to unwind an annuity would benefit those who bought the contracts with a small pension pot the most. Those with small pots receive pitifully small sums of income from an annuity and are often better off taking the sum as cash.
Webb added that annuity providers would not like the idea of unwinding annuities but a ‘conversion price’ the amount given back to a retiree minus income already taken and a fee, could be reached.