Minister Steve Webb is planning one last major assault on the stranglehold financial companies have on pensioners by overturning annuity rules.
Annuities provide a guaranteed retirement income, but millions of disgruntled pensioners were forced to buy low paying contracts which they cannot get out of.
Webb wants annuity providers to offer up to 5 million pensioners a cash lump sum in lieu of their monthly payment to buy out their contracts.
The pensioners will then be free to spend or invest the money how they wish in the same way as other retirement savers can spend their pensions under new rules that come into force form April 6. 2015.
“These pensioners should have the same opportunity as everyone else to spend their hard-earned retirement cash how they want,” said Webb.
Share prices plunge
“I want to work with pension and annuity providers to find a way to extend pension freedoms to those who have already bought an annuity but would prefer to take their money as a lump sum.
“I envisage an either or regime where they can keep their monthly income or cash in their contract. I can’t see why this shouldn’t be an option and expect providers to come up with a solution.”
Webb and Chancellor George Osborne have relentlessly drafted new legislation to weaken the grip of financial companies on their customers.
They have attacked pension charges, changed the rules to allow flexible access and are now looking at reversing annuity contracts.
Share prices of annuity providers have already plummeted as the new freedoms decimated the market.
Attack on financial firms
Osborne scrapped the obligation to buy an annuity some years ago, which meant instead of around 400,000 people a year having to buy into the miserable returns paid by annuities, the number of customers shrank to a dribble.
Webb then forced pension companies to offer customers annuity quotes from other providers in their pre-retirement packs.
Along the way, Webb has also attacked hidden pension charges.
Both Osborne and Webb have continually stated that their intention was to let pensioners control their own money and to remove the inflexible rules and high charges imposed by financial firms.
One pension giant claims the idea from Webb is just a vote catcher for the May general election.
““He sees this as a big vote winner. Another winner would be the Treasury, as people selling annuities will be taxed when they receive the cash value of their annuity,” said a spokesman for Aegon