You probably know by now that George Osborne announced huge changes to the rules governing annuities in last week’s Budget.
If you’re about to retire, don’t rush out and buy an annuity now. You need to think about the best approach for you now that the new rules give you more freedom.
And if you’ve recently bought an annuity, you may be furious that you’ve been locked into a low income when better options are now available.
Well, the good news is that some insurance companies have extended the cancellation periods for recently-bought annuities.
Hargreaves Lansdown has put together a useful table which gives the current state of play for ten providers.
| Annuity provider | Usual cancellation rights | What’s changed since the Budget |
|---|---|---|
| Aviva | 30 days from the date the application was signed | Now 30 days from when the policy has been set up instead of when the application was signed |
| Canada Life | 30 days after policy document issued | No change |
| Hodge Lifetime | 30 days from the date the application was signed | No change |
| Just Retirement | 30 days from date the client received their right to cancel (issued with application form) | No change |
| Legal & General | 30 days from the date the application was signed | No change |
| LV= | 30 days from the date LV= receive the completed application | Extended to 60 days from the date LV= receive the completed application – this is for customers currently within their existing 30 day cancellation period and for new customers who apply for an annuity in the next month |
| MGM Advantage | 30 days after policy document issued | Extended to 60 days after policy document issued |
| Partnership | 30 days after they receive a confirmation letter (posted to the client when Partnership processes the application) | Extended to 11 April 2014 (if current cancellation rights were beyond 11 April then the standard 30 days still applies.) |
| Prudential | 30 days from when they receive their first Prudential quote | No change |
| Standard Life | 30 days after policy document issued | No change |
Source: Hargreaves Lansdown
If you’re able to cancel your annuity purchase, it probably makes sense to do so. Then you can decide the best approach for you in an unhurried way.
The only exception to this is if you have a guaranteed annuity where you’re able to benefit from a much higher pay out rate.
Some guaranteed annuities pay out as much as 10% a year or more, so some insurance companies are keen to wriggle out of the guarantee if they possibly can. If you cancel your purchase, that could give the insurer the perfect opportunity to do just that.