Ken Davy: Annuities u-turn is common sense
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