More than five million people will be able to sell their annuities from 6th April 2017.
The changes, confirmed by Economic Secretary to the Treasury, Harriet Baldwin, mean retirees will be able to take the annuity as a lump sum or draw down the proceeds more gradually.
The Financial Conduct Authority (FCA) will put in place a consumer protection framework which could include consulting on a range of extra consumer protections, such as risk warnings and ways for consumers to understand the fair value of their annuities.
The Pension Wise service will also be extended to cover the secondary annuity market.
Harriett Baldwin said: “For most people, sticking with an annuity is the right thing to do. But there will be some who would welcome being able to draw on that money as they choose – the same freedom we gave people approaching retirement in April this year.
“That’s why I’m delighted that we’re extending our landmark pension freedoms to over five million people with annuities from April 2017.
“People who’ve worked hard and saved hard all their lives should be trusted to make the right decision for them and with the help of the regulator we will ensure these people have the right information to do that.”
Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown, welcomed the news but believe its appeal would be limited, saying: “This will now give millions more pension investors greater flexibility over their retirement income.
“Selling a guaranteed income will not be right for many people. Access to market competition to secure the best price and suitable information, guidance and advice should help to ensure that ordinary investors are protected and can make the best possible use of their money.”
Minister for Pensions, Baroness Altmann believes the new rules give people a degree more flexibility.
Baroness Altmann said: “The new pension freedom reforms are crucial in allowing people to make the most of their hard-earned savings.
“Keeping an annuity will still be the right decision for the majority of people. But some were forced to buy annuities in the past that may not have been suitable for them — and I am delighted that this reform will allow more people greater choice and the opportunity of a more flexible income stream.
“For the vast majority of customers, selling an annuity will not be the best decision. However, individuals may want to sell an annuity for instance to provide a lump sum for relatives or dependants; in response to a change in circumstances; or to purchase a more flexible pension income product instead.”
