With only six months to go before the secondary annuity market (SAM) was due to be implemented by the UK Government, HM Treasury announced in October that it was now scrapping the SAM.
The concept of SAM was announced by the Chancellor in 2014 and changes to pension legislation was expected to be made to enable people who had already purchased annuities in retirement to sell them in exchange for a cash-lump sum. While originally SAM was planned to be implemented in April 2016, given the complexities involved, it had been delayed to April 2017.
In the surprise U-Turn, Simon Kirby, the economic secretary to the Treasury said the government had decided not to proceed with SAM because it had become clear “that creating the conditions to allow a competitive market to emerge could not be balanced with sufficient consumer protection”. He further stated that “we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited”.
Pension providers are now counting the cost of the government’s change in policy. While the SAM had been delayed, since the 2014 announcement, providers had assumed the market was to be established and had started to put in place new processes for annuitants wanting to sell their annuities from 2017.
Many within the pensions’ industry had voiced scepticism regarding the merits of the SAM. A successful SAM would have required many technical challenges to be overcome. As a result, while the change in government policy has come as a surprise, it is not necessarily unwelcome by the pensions’ industry.
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