I had a small private pension pot worth approximately £13,700, which I used to buy an annuity. However, after tax I only receive £60 a month. I have changed my mind about the annuity and would like to take what is left of my money as a lump sum. Can I do this?
Pension freedoms, which were introduced from April 2015, have given many people far more choice about how they access their pension benefits. In particular, they have meant that far fewer people are buying annuities with their pension pots.
However, there are some people for whom the pension freedoms don’t apply. This includes those in defined benefit pension schemes, such as final salary schemes, and those who have already bought an annuity with their pension fund. As you have already bought an annuity, it is likely that you will have no choice but to keep it..
In March 2015, the government did announce plans to launch a secondary annuity market that would have allowed people to sell their existing annuities in exchange for a cash lump sum. This would have been launched from April 2017. However, in October 2016 the government decided to cancel these plans as it didn’t believe there would be a competitive market, meaning those selling their annuities were likely to get poor value.
While this might be disappointing for you, and while your annuity payments are quite small, at least the annuity will guarantee to pay this income to you for the rest of your life.
Patrick Connolly is a certified financial planner at Chase de Vere