HM Revenue & Customs (HMRC) has estimated that 300,000 annuity holders will cash in their contracts when new legislation comes into force next April.
The prediction, which will bring in a tax windfall of £960 million in the first two years after the changes have been introduced, was made in a paper released on Wednesday by HMRC.
In total there are around five million individuals who have an existing annuity, so the prediction that only 300,000, 6%, are expected to sell is small.
Other research has pointed to a higher take-up. A survey by Old Mutual Wealth, for instance, concluded that 850,000 could cash in.
Pension freedom extension
In the report HMRC said the secondary annuity market will be available to both defined contribution and some final salary schemes.
The proposed creation of the secondary annuity market was first announced in the 2015 Budget. The move is an extension of the wider pension freedoms, which came into force last April.
Under the new rules pension savers will be able to sell their annuity, either to an individual or to an insurer, in return for a lump sum. Others may choose to put the money into drawdown, or even to buy another annuity.
Previously those who wished to sell faced a huge tax charge, between 55% and 70%.
When the new rules are ushered in, retirees will instead only be taxed at their marginal rate - though they should be aware that the lump sum may push their total income for the tax year into a higher tax bracket.
Those who sell to a third party will give up their guaranteed income to the buyer. But the annuity will still be tied to their name. When they die, the payments will stop.
A number of concerns have been voiced. Some experts, for instance, have warned that people have unrealistically high hopes for how much they will be able to get by selling their annuities.
There are also a number of unanswered questions, such as how an insurer will know when the original annuity holder has died.
Jon Greer, pensions technical expert at Old Mutual Wealth, said: "Anyone considering selling their annuity should be reminded that the old adage of 'a bird in the hand being worth two in the bush' is not necessarily always true.
"While a lump sum may look attractive in the short term, annuities have the benefit of being guaranteed income for life, and may also contain additional advantages that customers should be aware of before selling.
"The problem I can see with this market is that buyers are likely to have all the knowledge, and the sellers will have little to none."