Ken Davy: Annuities u-turn is common sense

07 Nov 2016

It may be true that one swallow does not make a summer. However, it seems to me that one u-turn is certainly a good start for autumn.

When the idea of selling secondhand annuities was first announced, I voiced strong reservations about its ability to deliver either fair or positive benefits for clients.  

I was therefore heartened by the announcement that HM Treasury had decided to "shelve" its plans to open up this market to consumers. My expectation is that the whole idea will now make its way from the shelf to the dustbin as quickly as possible, so the u-turn can be seen to have been completed.

On its decision, the Treasury stated, the market would have produced poor outcomes for the consumer.  

I agree, and really struggle to see how anyone could have ever considered it a practical idea.

A particular concern was that the consumers most likely to be attracted to the idea of selling their annuities would have been those who were most vulnerable and whose decisions were driven by short-term pressures, regardless of future financial detriment.  

The whole culture of professional financial advice is based on the principles of transparency, treating customers fairly and assessing the vulnerability of clients. The vast majority of financial advisers already practise those principles and the last thing the sector needed was the government to create a market that would expose the most vulnerable to transactions they would not fully understand, yet would inevitably cause them to suffer loss of income and further deprivation.

Scrapping the secondary annuity market seems to be so evidently a victory for common sense that I was amazed to see Liberal Democrat MP Greg Mulholland lamenting the u-turn. Mr Mulholland complained that “tens of thousands” of consumers were “trapped in poor value annuities” and now would be unable to take advantage of the opportunities presented by the secondary annuity market.

Unless I am missing something, these comments show a lack of common sense. If Mr Mulholland is correct about these tens of thousands of consumers trapped in poor value annuities, what on earth makes him think they would be able to sell them? Nobody would buy them. To have continued with this flawed plan would have raised false expectations for annuity holders for no good reason. 

Ken Davy is chairman of SimplyBiz Group 


Testimonials

"I am writing to say how pleased I am with all aspects of your provision, from the guidance through the novation process to my initial compliance visit. Anyone who is able to make a 6 1/2 hour detailed compliance assessment both interesting and enjoyable must be quite exceptional!"

Dr David Carter APFS
Tiverton

Read More

Latest News

"FSCS funding should be fair and affordable"

November 17, 2017

Rather than making a knee-jerk rejection, the Association of British Insurers (ABI) should follow Aegon UK’s lead by focussing on fairness and affordability when considering the latest Financial Services Compensation Scheme (FSCS) funding proposals.

Read more >

"Self-employed should mind the protection gap"

November 13, 2017

The recent scary antics of Halloween were an appropriate backdrop for Scottish Widows to release the even more frightening results of a survey about the protection coverage of the UK’s self-employed. 

Read more >

"California dreaming on such a winter's day"

November 06, 2017

As the nights darken and the winter cold approaches, it is a good time to consider spending a few tax-deductible days in the Californian sunshine.

Read more >

Matt Timmins: New guidance body has no right to word 'advice'

October 20, 2017

Much more needs to be done to help educate consumers on the vital difference between receiving guidance or advice

Read more >