Pensions: Sale of Annuities

Lord Naseby Excerpts

Wednesday 19th October 2016 Lords Chamber

[Lord Young of Cookham]

In all seriousness, I commend the noble Baroness on her foresight in being able to see in March 2015 that this was not a runner. That was not the view of many financial commentators at the time. It was seen to be consistent with those who had not yet reached retirement age and therefore had the freedom not to have an annuity. It was seen to be right to extend that freedom to those who had already purchased an annuity. In principle, it was the right thing to explore but, as I said in response to my noble friend, as we drilled down it became clear that there was not the secondary market that was necessary. Moreover, those who were going to sell their annuities would have had to have a medical examination, they would have had to pay brokerage charges and they would probably have faced administrative costs. It would have reached only a relatively small percentage. For all the reasons she has given, we have come to the same conclusion as the noble Baroness, albeit a little after her.

[Lord Naseby (Con)]

My Lords, I declare an interest as a trustee of the Parliamentary Contributory Pension Fund; I should make it clear that you cannot have an annuity through that fund. Nevertheless, is not the core of the issue that a number of commentators have rubbished current annuities but that, in any case, no one knows exactly how long anyone will live, and that at some point your annuity will pay back quite handsomely regardless of what its level may be? Against that background, it seems to have been absolutely right for Her Majesty’s Government to do another analysis now, in a changing situation, and to decide that what was said more than a year ago is not correct today. Given that, I would have hoped that Her Majesty’s Government would think again and I congratulate them on doing so.

[Lord Young of Cookham]

I am grateful to my noble friend for his robust support for the decision that has just been taken. Of course, even had we gone ahead with the policy, a huge number of those with annuities would have been better off sticking with them rather than trading them in, for the reasons that we have heard.