The reform will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the incomes they receive from their annuity.
Currently people wanting to sell their annuity income to a willing buyer face a 55% tax charge, which rises to 70% in some cases. The government will remove this charge, so people are taxed only at their marginal rate.
The government said the reform would help 5 million pensioners who are currently locked into annuities, giving them the same access to their defined contribution pension pots as the chancellor announced last year for people who have yet to take their pensions.
Speaking ahead of the Budget, Osborne said: ‘For most people, sticking with that annuity is the right thing to do. But there will be some who would welcome being able to draw on that money as they choose - the same freedom we are offering those approaching retirement in April this year.’
Next month, these pension reforms will take effect, giving retirees the freedom to cash-in their pension when they retire, rather than buying an annuity. Pensioners can either drawdown as much or as little of their pension pot as they want, anytime they want, or take it as a lump sum.
The government will later today launch a consultation on the measures that are needed to establish a market to sell and buy annuities.
