I bought my annuity before the start of the pension freedoms and now they’ve been introduced I like the sound of them much more. I was wondering if it’s possible to cash in my annuity to opt for pension drawdown?
Unfortunately for those who’ve already bought one and want to change, the government scrapped plans to let people cash in their annuities in 2016. Initially this was going to be part of the new pension freedoms and was due to start from April 2017.
With this now being scrapped, there’s no opportunity to change your mind apart from in the first 30 days following your annuity purchase.
The government felt that there would not be a sufficient market for so-called secondary annuities. The danger from this is that consumers wouldn’t get a fair price from selling their annuity pension for cash.
There may be some hope for those who bought an annuity with the smallest pension pots (those worth less than £10,000).
There are rules in place that allow you to cash in your annuity in such circumstances, but only if your provider is willing to let you. There is no obligation for them to accommodate your wishes. If they do, any payment you receive will be subject to income tax.
If you’re struggling on a low annuity income, make sure you’re claiming all government benefits that you’re entitled to.
Pension Credit, for example, is a means tested benefit available to pensioners on low incomes. It tops up your weekly income if it’s below £159.35 for a single person or £243.25 for couples.
Yet according to the Department for Work and Pensions, £2.67bn in Pension Credit went unclaimed in 2015/16 — only 65% of people took it up.
I had the pleasure of dealing with Jake Mills in organising my insurance. Jake was fantastic to deal with — his patience and understanding really helped.