Updated: June 21, 2019

A Guide to Selling Annuities

It's only possible to sell an annuity under very specific circumstances. Find out whether yours is sellable and how to offload it in our guide

Get Started
Ask A Quick Question

Ask A Quick Question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 2
2 of 2 Send!

No impact on your credit score

Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: June 21, 2019

There are British retirees who are locked into poor-value annuities that give them only a couple of pounds per week, and that same return to the estate with their death, while others don’t feel that they’re on the best deal for their retirement needs and circumstances.

Here are the guidelines on selling annuity payment for cash:

In all cases, you’d be advised to make an enquiry for expert advice. Indeed, the government urges pension holders to seek qualified guidance before buying an annuity.

Can I sell my annuity pension now?

The answer to this question depends entirely on how much your annuity is worth.

For years, annuities in Britain were mis-sold by some providers, leading sections of the media to report that we’re in the midst of an ‘Annuity Scandal’In December 2015, the government decided to allow UK residents to sell their annuities following April 2017.

In October 2016, however, the government backtracked fearing that annuitants, particularly elderly and low-value annuity sellers, would be shortchanged.

Who can sell annuities in the UK?

At the time of writing, only people with £10,000 and less in their annuities can cash in those funds, and then only with consent from their providers. There’s a growing crusade to allow annuity holders with pots above £10,000 to sell their annuities.

Speak to a expert today

Get Started

Why would you want to sell your annuities?

There are various reasons that holders want to sell their annuities, such as:

  • They’re trapped in poor-value annuities that they can’t pass onto potential beneficiaries after their death. Millions of people have annuities that pay only several pounds a week.
  • The last few years, too, have seen plummeting interest rates, causing more people to prefer pension drawdown to annuities.
  • The main attraction of annuities is their guaranteed income, but with people living longer and healthier this attraction has mostly subsided.
  • Annuities of no more than £10,000 are relatively small. Converted into cash, that sum can help to, for example, pay off debts, help relatives or dependents, cover some emergency, or help you out in the event of a marriage or a divorce.
  • Annuity holders may want to cash in this trove for a more flexible pension income product.

Which kind of annuities can I sell?

There is the single standard, or conventional, lifetime annuity, where a provider converts your pension fund into an annual guaranteed income for the rest of your life.

And then there are supplementary features like the following:

  • Variable annuity. You retain the pension drawdown, investing part of your assets in securities like stocks and bonds. At the same time, you invest the rest of your funds in a  flexible annuity for guaranteed income.
  • Short term annuity. Short term annuities, otherwise called temporary annuities, cap at five years. Holders are paid their chosen amount of income per year until their term runs out.
  • Guaranteed annuity. Your provider sends you payout for a guaranteed period of time (say five years) regardless of whether you live or die.
  • A fixed indexed annuity (FIA). Otherwise called an Inflation-linked annuity, or the Retail Prices Index (RPI)-linked option, is where your payout is adjusted each year in line with inflation. There is typically an upper limit on the amount of interest given in a particular period, as well as a “floor” for downside protection.
  • Escalation or percentage increasing annuity. Your provider gives you an extra fixed percentage, usually 3% or 5% a year.
  • Investment-linked option. This feature protects you from major losses. As with the inflation-linked annuity, there is typically an upper limit on the amount of interest given in a particular period, as well as a “floor” for downside protection.
  • Enhanced/impaired annuity. That’s where you buy for yourself or your partner an enhanced income for health conditions and other factors, like poor lifestyle, that may shorten your life expectations. Your income could be 10-15% more (if not higher ) than a standard annuity, since your provider anticipates a shorter payout term.
  • A joint-life-last-survivor annuity. Instead of buying the single annuity option where the annuity belongs only to you, you can stipulate that your nominated beneficiaries receive 100% of the remaining pot with your death.
  • Value protection. Otherwise called “annuity” or “value” protection. You buy this feature to ensure your remaining funds revert to your nominees after your death.

How do I sell my annuities?

Only a select number of insurance companies sell annuities. With this in mind, it’s advisable to speak with a pensions expert who can look at your personal circumstances and help you explore your options.

These companies sell your annuity to financial institutions, where the highest bidder wins. These insurance providers then pay you the substitute of the income you would have otherwise received as your annuity. The older or less healthy the seller, they receive since her lifespan is likely to be shorter.

Sellers get the money from their sales as a lump cash sum or cash drawdown over a set number of years.

At the time of writing, only about five percent of annuity owners with funds of around £10,000 plan to sell their annuities. Meanwhile, organisations like Money Mail’s Unlock Our Pensions drive, as well as some activist consumer groups and pension firms, lobby for the government to expand the market to annuity holders above £10,000.

Make an enquiry  to be referred to a pensions expert.

How much can I make selling annuities for cash?

With annuities of no more than £10,000, sellers can anticipate around £2,000 at the time of writing. That’s because deductions can bite into your income. On top of that, inflation tends to whittle the value of your purchase, so most annuity holders sell their annuities at a loss.

For example, if you were to purchase a £7,000-a-year annuity 10 years ago for £100,000, you would likely get about £48,000 if you sold that annuity today.

You can also make an enquiry to speak to a pensions expert for a quote.

Is there a calculator I should use?

There are annuity calculators available online but keep in mind that they will only give you a rough idea of the amount you can expect to make, and these tools are not bespoke to you.

This simple calculation gives you an approximation of how much you may make if you sell your annuity. It also suggests an initial starting price for the bidding process.

  • Factor in the annuity product you want to sell e.g.: a single life, 5-year lifetime annuity with no added features.
  • Add the payment amount of the total product e.g £7,000.
  • Include and total the annuity income you receive per year.

The buyer will, also, factor in the seller’s expected lifespan based on factors that include their health and lifestyle/work conditions.

Insurance providers who arrange the bidding procedures wrap the payment start date into the calculations. Some annuities are deferred which makes them more expensive.

Bidders take into account health and age as well as market factors, namely the prevailing rate of Government bonds (called gilts) as well as inflation.

You can contact our expert pension advisors for quotes.

How much tax do you pay on income from sold annuities?

The UK Government treats annuities as income tax. Originally, in 2015, the government had planned to tax the second-hand market for annuities at a marginal rate.

That is where the government deducts the sum of the income from the original value of the annuity. However, you’re not taxed for income that’s £12,000 and less. Since you’re currently only allowed to sell annuities worth £10,000, the proceeds from the sales are tax-free.

How do you benefit from selling your annuities?

Thousands of people are tied to annuities that give them only a couple of hundreds of pounds per week. If they sell it for a lump sum, they could get hundreds, if not thousands, of pounds in exchange. On top of that, your cash proceeds would be 100% tax-free.

Alternately, you could cash-in your annuity for a new drawdown account or for a chance to reinvest your money for some potential capital growth.

What are the risks of selling your annuities?

You’re likely to get considerably lower than what you initially paid for. There are a number of reasons why this might be the case, including…

  • There’s inflation that cuts into your money.
  • Aspects like age and ill health mean you get significantly less than what you initially paid for.
  • There’s little competition in this market so there are fewer bidders.
  • There are the penalties you pay for unwinding your annuities.

On top of that, financial institutions tend to cap their bidding price, since they need to consider items like paying for medical exams (to evaluate your health), advertising their services, their own profit margins and so forth. These deductions cut into the value of your policy.

For this reason, few providers encourage consumers to cash-in their annuities. Indeed, Aviva, for instance, discourages selling annuities on the grounds that sellers would almost certainly lose.

Finally, the prevailing rate may have been higher when you bought the annuity than when you plan to sell it, compelling you to sell at a loss.

For example, let’s say you bought a lifetime annuity in 1996 when rates were at a historic high. If you were to sell your annuity now when rates are far lower, you risk selling your annuity at a loss.

Still uncertain on whether you want to sell your annuity? It’s always a good idea to make an enquiry so we can connect you with an informed expert.

What do you do with an annuity that’s more than £10,000?

Say you’re locked into an annuity that’s more than £10,000 which means you currently can’t sell it. What do you do?

Here are some options:

  • Contact your provider. It’s unlikely that providers will agree to refund annuities; after all, they are seen as an irreversible purchase for life. On the other hand, a growing number of providers are succumbing to pressure by MPs and consumer activists.
  • Complain. If you think the product was missold, contact the government. Watchdogs have found that upwards of 90,000 retirees in ill health were duped into buying annuities. If you think that either you are one of them, or that you were duped for other reasons, the Financial Conduct Authority (FCA) advises you to follow up the issue with your provider. If that doesn’t help, the FCA encourages you to approach the Financial Ombudsman.

Need help? Make an enquiry to be referred to trusted pensions advisors who can direct you.

Can I buy someone else’s annuity?

No. To dissuade fraudsters, the government proscribed that only credible financial institutions can buy your annuities. It disallows retail bidding. The whole operation, which includes providers who strategise the proceedings and bidders who buy, is supervised by the Financial Conduct Authority, among other bodies, to ensure consumer protection.

Pension Wise and selling your annuity

To help you sell your annuity, the government launched the pension guidance service website Pension Wise that not only advice on pensions, but also helps you recognise red flags when it comes to selling your annuity.

Additionally, the government recommends that you seek the advice of your provider or of a qualified financial consultant. In fact, HMRC obligates elderly and vulnerable consumers to solicit guidance. That’s where we come in.

Selling structured settlement annuities

Several of our clients understandably confuse structured settlements with annuities and ask us how to sell structured settlement annuities.

Please note: Structured settlements are not annuities. They are legal tools used for compensating those who have suffered an injury of some kind. For example, an employer compensates the worker who injured himself on the employer’s premises.

Annuities, on the other hand, are investments that give you a guaranteed income for a certain amount of time, or, in the case of standard lifetime annuities, until you die. You cannot sell structured settlements. You can sell annuities under the right circumstances.

Can I sell my annuities online?

In the US that may be a possibility but in Britain, you start off by selling through your product provider, so the online search for a seller becomes irrelevant. You may be in contact with your seller through email and (maybe) through their website, but otherwise, they transact the entire process for you, from finding bidders to wrapping the transaction. There’s no online sales attempt on your part, at all. Make an enquiry to speak to an advisor for more information.

Speak to an advisor

Selling an annuity is one of the most crucial decisions you may ever make when it comes to pensions. Since you can’t change your mind, you’ll want to receive a thorough analysis of your situation and top advice.

Unsure and looking for more information on whether and how to sell your annuities? Call us today on 0808 189 0463 or make an enquiry.

Then sit back and allow us the hard work in finding the right annuity advisor for your situation. We don’t charge a fee and there are no obligations.

Ask A Quick Question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 2
2 of 2 Send!
Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Get Started