The idea of secondary annuities was controversial from the first moment it was floated. Despite being a welcome additional option in the minds of many savers, the industry in general didn’t respond particularly well to the concept. Which is precisely why those in the latter camp may find themselves understandably relieved, with the decision having been made to scrap it altogether.
What had so many worried from the onset was the plain and simple fact that the UK government didn’t really know what it was doing. With a very limited understanding of the annuity market, it became apparent that little had been taken into account with regard to future challenges and issues. As such, the announcement that secondary annuities would be scrapped that was made on October 18 didn’t come as the biggest surprise for the industry in general.
“It has become clear that creating conditions to allow a competitive market to emerge could not be balanced with sufficient consumer protection”. That’s the way the government explained it, anyway. The long and short of it being that it proved prohibitively difficult or impossible for savers to ensure they were getting the best possible deal. The financial services market didn’t seem particularly interested in getting involved with it all, which for obvious reasons didn’t bode well for the consumer.
This in turn would in many instances lead on to a future where the value of the annuity would inevitably fall considerably over time. You speak to a financial adviser, peruse the options and ultimately decide on a product under advisement. You then enjoy peace of mind for any number of years, only to discover come crunch time that getting someone to buy it for a good price isn’t exactly easy. Quite to the contrary in fact – the likelihood is one of moderate to heavy losses.
On top of all of this, there are those within the industry who claim that one of the biggest problems with the whole secondary annuity concept is that it served as a dream ticket for fraudsters. It’s argued that it made it far too easy for those wishing to do so to lead their clients and customers down entirely the wrong path for their own financial gain. Again, this isn’t something the average saver should have to worry about or even consider when making important financial decisions – hence why the industry is glad to see the back of the scheme.
Of course, there will be plenty of people for whom the end of secondary annuities comes as a blow – those who were standing by and waiting for a solid pay-off. But on the other end of the fence, far more will probably find themselves far better off without them, the industry in general seems to agree.
Making your way through the maze of both long-term and short-term saving options is tricky to say the least. The one thing the government and the industry both agree on is that all important decisions should be made strictly under the advisement of a leading independent financial adviser.