Closed-book provider Rothesay Life has written out to 40,000 Aegon and Zurich customers offering them a cash lump-sum in exchange for their annuities.
Kathryn Jones, actuarial lead for this project, said policyholders between the ages of 55 and 80 who have an annuity with a value of less than £10,000 are being offered cash in exchange for their guaranteed income.
She said the insurer has written to 40,000 customers this year in tranches and will write to a further 25,000.
Jones said customers were not required to get advice and that the reception has so far ‘been really positive’.
‘Since freedom of choice legislation came into force we give policyholders the option to take their benefits as a lump sum at retirement if the value of their benefits is under HMRC limits,’ Jones said.
‘Before freedom and choice they were forced to buy an annuity, so we ended up inheriting from Aegon and Zurich a large number of policyholders with very small pensions in payment. There is a lot of pent up demand, for most people they want the choice of having a lump sum.’
Jones added £10,000 was the limit set by HMRC for making these annuity offers.
In 2016 the government scrapped plans to allow annuity holders to sell their policies through a second-hand annuity market.
Earlier this year Royal London offered 33,000 members the chance to sell their guaranteed annuity rate (GAR) for a higher lump-sum.