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Budget 2015 - Pensions freedom extended as annuity sale plans confirmed

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18 March 2015

Chancellor George Osborne has confirmed retirees will be allowed to sell their annuity contracts for cash, from April 2016, without facing "punitive tax charges".

At present, people wanting to sell their annuity income to a willing buyer face a 55%, or up to 70% in some cases, tax charge.

Mr Osborne said it would remove this "punitive" charge, so people are taxed only at their marginal rate.

The government believes that, for most people, keeping their annuity income will be the right decision – allowing them a stable and guaranteed retirement income. But individuals’ needs vary greatly and it is not for the State to determine how they use their income. So for instance, those looking to exchange some of their retirement income to pay off debts, or help their children or grandchildren get a step up in life, should be able to do so if they can find a willing buyer.

The Chancellor said: "The creation of a well-regulated carefully-designed second-hand annuity market could mean that people’s annuities are now more flexible, still guaranteeing an income for life but also able to provide some extra cash when it is needed. It will provide those five million older people who have already taken an annuity with a greater degree of flexibility."

He added: "Admittedly, the devil is in the detail and it now falls to the government and industry to create a safe market which provides real value to consumers.

Extending the freedoms to past-annuitants and providing future generations with even more flexibility is simply not good enough, unless it has a genuinely positive impact on their lives and this needs to be at the heart of the consultation."