Qualified advisers answering your
Financial Questions
call 0800 092 1245

Significant risk to pensioners who choose to sell their annuities – FCA


Come April 2017 when the market for selling an annuity opens, the City regulator, the Financial Conduct Authority has claimed that many pensioners will be at significant risk if they opt to sell their retirement income for a lump sum.

An estimation has been provided by the government that 30,000 people are expected to cash in their pension products when the changes begin.

In response to the concerns the Financial Conduct Authority (FCA) has collated risks and potential dangers associated with selling retirement incomes. Some of the concerns include pensioners calculating good value for their annuity, the exposure and susceptibility to scams, and pressure being placed on those with debt to sell their pension product to settle the outstanding bill.

Pension changes

From April 2017 pension changes come into place, which will allow individuals who receive a lump sum from selling their annuity, to only pay tax at their highest marginal income tax rate. Currently, it is possible to sell an annuity, but a tax charge of between 55% and 70% makes it an impractical option for most to participate in.

It is predicted that approximately five million people in the UK currently have an annuity as part of their retirement income.

Owing to a tax collection of an estimated £3,200 per annuity seller, a windfall of approximately £960m is expected by the Treasury during the first two years of the new scheme.


Director of strategy and competition at the FCA, Christopher Woolard, has raised concerns over the pending changes.

"We recognise that some consumers may be particularly vulnerable.

"We have set out proposed rules and guidance that will help ensure that consumers have an appropriate degree of protection should they decide to sell their annuity income."

Those proposals include:
• A requirement for sellers to seek financial advice for annuities over a certain value
• An extension to the government-backed, free Pensions Advisory Service
• Sellers to be given specific warnings of the risks early in the selling process
• Consent to be gained by a broker from anyone else who would benefit from the annuity, such as a spouse, before it is sold
• Brokers and advisers to set out their charges upfront to customers
• A 14-day cancellation period and access to the Financial Ombudsman if sellers are unhappy

In addition to Woolards concerns the FCA has also warned that “there is a significant risk of poor outcomes" for consumers selling their annuities.

Need Financial Advice?

If you have any personal finance questions related to this news article, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.

Share this..

Related stories

Financial Guides

Financial Calculators

Our useful calculators can help you get your finances in order:

Latest News


Helpful new tax year facts that could affect you and your money

Blog | Seven helpful new 2016/2017 tax year facts that could affect you and your money. Our recent online blog shares a brief outline on how to stay up to date.

Read more

Useful Links

Popular Searches

Please Enter More Details

Enter More Details