The scrapped plan to sell annuities

If you already hold an annuity, you cannot sell it. The government once planned a market that would have let people do exactly that, with the Financial Conduct Authority (FCA) consulting in April 2016 on rules for a market due to start in April 2017¹. The government then confirmed that this policy will not be taken forward, so the market never opened².

That matters because the idea still circulates. People who bought an annuity years ago, often when rates were higher, sometimes hear that they can release cash from it. They cannot. Anyone offering to buy an annuity income, or to release money tied up in one, is offering something that does not exist in the UK.

What follows is what the scheme would have allowed, the protections that were proposed, and what your real options are now if you want income or cash from a pension.

What the secondary annuity market would have allowed

An annuity is a regular income payable for life, bought from a life insurance company with the fund built up in a pension³. Once bought, it is normally fixed: the income arrives, and the capital behind it is gone.

The proposed secondary market would have changed that. Someone already receiving an annuity income could have sold the right to that future income to a buyer, taking a cash sum instead. The government consulted on the tax framework for the proposed secondary market for pension annuities in April 2016², and the FCA consulted in parallel on the conduct rules that would govern how sales worked¹.

The FCA was clear that this would not be an ordinary market. It said: "We believe that consumers in this market are more likely than in other markets to be vulnerable"¹. That judgement shaped almost every protection proposed, from the warnings sellers would see to the advice requirement above a threshold.

The market never opened. The government's consultation page records the outcome plainly: "this policy will not be taken forward"². The practical effect is that an annuity, once bought, stays bought. There is no route to sell the income, and no buyer can purchase it.

Taxed as income or deferred in drawdown: the two ways to take the proceeds

Had the market opened, sellers would have faced a choice about how to take the money, and the tax treatment differed.

The first route was to take the proceeds as income. All pensions, whether scheme pensions, annuities or drawdown, are taxable in the hands of the individual as pension income at their marginal rate⁴. Income from private pensions, whether paid directly by a provider or from an annuity bought with the fund, is paid with tax already deducted through the pay-as-you-earn (PAYE) system⁵.

The second route was to defer the money into drawdown. Drawdown means leaving some of your pension fund invested and taking only part of it as income, drawing money from the pension fund itself⁶. The two ways of generating an income from retirement savings are purchasing an annuity or drawing down from capital⁷.

The tax position on death differs between the two. Where someone dies after their 75th birthday, both lump sum withdrawals and regular income taken through income drawdown or an annuity are taxed at the beneficiary's marginal rate of income tax⁸.

For anyone weighing up an annuity today, the same two routes apply to the pension pot itself: buy a scheme pension or annuity, or draw an income directly from the fund as drawdown³. More detail sits in your options for taking money from a pension and pension drawdown explained.

Protections planned for sellers: 8 risk warnings and advice above a threshold

The FCA proposed a set of protections that would have applied before any sale completed. The centrepiece was a table of eight risk warnings, which sellers should receive at least once, and as early in the process as possible¹.

Above a certain value, a seller would have had to take advice. The FCA said "a seller looking to sell an annuity income stream above a certain value will be required to seek appropriate financial advice before proceeding with the sale", with the threshold to be set in secondary legislation¹.

Firms would also have had to disclose costs early. The FCA proposed a rule requiring a firm, at first contact, to inform the seller of the types, and reasonably estimated amounts, of other costs it may charge, for example for a medical examination¹.

Vulnerability got specific attention. The FCA said it would provide guidance in its Handbook to remind firms active in this market about their existing legal obligations when dealing with sellers who may be vulnerable due to a possible lack of full mental capacity¹. In a separate passage it proposed to provide Handbook guidance reminding firms of those same obligations¹.

That approach mirrors how other later-life markets handle vulnerability. In equity release, much care is taken throughout the process to ensure that any vulnerable customers, for example someone with a sight impairment, are appropriately catered for and concerns such as coercion are addressed before the case proceeds⁹.

How quotes, broker charges and other costs were to be shown

Costs were to be visible at every stage, not buried in a final offer.

Brokers and adviser-brokers would have had to set out their charges up front, in writing, and agree them with the seller, rather than being paid potentially variable commissions set by buyers¹. That rule was aimed squarely at the conflict of interest the FCA had identified, where the person arranging the sale might be paid by the other side.

Quotes had to be net. The FCA said "All quotes, even indicative quotes provided prior to any required health assessments, should be presented net of any additional costs charged by the firm"¹. A second passage put it more broadly: all quotes, no matter at which stage in the customer journey they are given, should be presented net of any additional charges the firm may levy, or estimated costs if actual costs are not known¹.

Sellers would also have seen what they were giving up. The FCA proposed to require buyers, brokers and adviser-brokers to, in most cases, provide a quote of the current replacement cost of the annuity income the consumer is looking to sell, if it was to be bought new on the open market, in a standardised format alongside the firm's quote¹.

That replacement cost figure is the one that matters most in any resale idea. It shows what the same income would cost to buy back today, which is usually more than a buyer will pay for it.

Selling would have ended a partner's or dependant's benefit

An annuity can carry benefits beyond the person who bought it. A joint life annuity or one with a guaranteed payment period can keep paying a partner or dependant after the original holder dies.

Selling would have cut that off. The FCA stated: "If an annuity income was to be sold, contingent beneficiaries could no longer benefit under the contract"¹. A contingent beneficiary is someone who would receive the income if the main holder died first.

That is the trade-off at the heart of any resale: cash now, in exchange for income that would otherwise have continued to someone else. It is also why the replacement cost quote and the risk warnings were proposed together, so a seller could see both what they were giving up and what it would cost to restore it.

For anyone thinking about what happens to pension money on death today, what happens to your pension when you die sets out how beneficiaries are treated, and is an annuity death benefit taxable? covers the tax position.

Risks the FCA identified for people selling their annuity

The FCA listed the risks it saw for sellers in this market: longevity risk, value for money, consumer inertia, vulnerability, potential conflicts of interest, potential risk of investment scams and fraud, and market depth¹.

Longevity risk is the risk of living longer than the money lasts. Someone who sells a lifetime income for a lump sum and then lives to 95 has traded a guaranteed payment for a pot that may run out. Value for money is the gap between what a buyer will pay and what the income is worth to the seller. Consumer inertia is the tendency to accept the first offer. Market depth is whether enough buyers turn up to make bidding competitive at all.

Scams and fraud were on the list, and that concern has only grown. The FCA warned in 2025 about investors in contracts for difference at risk of losing UK protections¹⁰. Pension cold calling is now illegal: "It's illegal for companies to make unwanted phone calls to people about their pensions. Those that break the rules may be" prosecuted¹¹. A ban on cold calling was introduced through secondary regulations under the Financial Guidance and Claims Act 2018¹².

The FCA also decided against blind bidding, where buyers bid without seeing rival offers. It said: "We decided that imposing blind bidding rules would be contrary to our desire to have transparency in the bidding process"¹.

What your options are now

With resale off the table, the choices are the ones that have always applied to pension money.

If you have not yet bought an annuity, you can shop around among providers rather than accepting your current insurer's offer, and you can compare a lifetime annuity with a fixed term one. Annuity providers and shopping around and fixed term or lifetime annuity? cover both.

If you are already in drawdown and want the security of a guaranteed income, you can still buy an annuity with the remaining fund. Buying an annuity after drawdown explains how that works.

If you hold an older policy, it may carry a guaranteed annuity rate, which can be worth far more than the open market would offer. Guaranteed annuity rates on older policies explains what those are.

Free, impartial guidance is available. Pension Wise covers your options for taking money from a pension, and income drawdown or an annuity: which is right for me? sets the two side by side.

If a firm has already approached you about your annuity, or you have lost money, pension scams: warning signs, transfers and getting help explains where to report it, and complaining about a pension provider, platform or fund manager covers the complaints route.