The UK has announced that measures announced last year to give more choice to individuals on how to use their pension fund will be extended to people who already have an annuity. With effect from April 2016 the restrictions on buying and selling existing annuities will be removed. This will allow persons receiving a pension to sell the income stream they are receiving from their annuity without the need to unwind their original annuity contract.

Individuals will able to use the capital from the sale of the annuity income as they choose, in the same way that those individuals retiring now may choose how to use their pension pot. The proceeds of the sale of the annuity may be taken as a lump sum or placed into drawdown so the funds can be drawn down and used as and when required.

For people retiring now the pension changes announced last year will take effect from 6 April 2015. The new changes now announced for persons who already have an annuity will take effect from 6 April 2016. These new changes are likely to affect around five million people who currently have an annuity.

At the moment people looking to sell their annuity income are subject to a 55% tax charge, and this can increase to an effective rate up to 70% in some cases. This charge will be removed and individuals will only be subject to tax at their marginal rate of personal income tax.

The UK government will be issuing appropriate guidance and consumer protection measures. The government is launching a consultation on the measures required to set up the market for the purchase and sale of annuities.