Budget 2015 Sell Your Annuity

Budget 2015 Sell Your Annuity.

Chancellor George Osborne confirmed in his budget speech that the government has launched a consultation to enhance the new pensions flexibility rules by allowing people who have already purchased an annuity with their pension fund to be able to sell their annuity in full or in part.

Government thinking behind this move is to create an additional/secondary annuity market where people who do not need their annuity or indeed have an immediate requirement for a lump sum can benefit from this new flexibility.  In addition, those that seek investment opportunity and income stream have a new option to buy this via an annuity sale.

Currently if you sell your annuity for a cash sum this is deemed an unauthorised payment and is taxed at 55%, the government have confirmed this will be removed.

The proposals suggest that the annuity can only be sold to a commercial third parties and not to members of the public.

Whilst this offers a new opportunity for people who perhaps have enough annuity income or their circumstances have changed and they require capital, it should be noted that in effect this will be a double tax revenue' cash cow' for the government:
• when you sell your annuity you will be taxed at your marginal rate of income tax on the sum received
• the new owner of the annuity will also be subject to a tax charge on the income that they receive, this is because your existing annuity company will not be allowed to buy back the annuity for a cash sum and thereby cancel the contract, the annuity income will continue to be paid to the new owner

Being cynical, again we suggest this move is not just about retirement flexibility it is about increasing tax revenue for the government.

The proposal is to allow people to sell their annuity from April 2016.

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