One item that stood out in an otherwise bland and colourless Budget was the announcement that the Government is to legislate to establish a market for buying and selling annuities from April 2016.

Ever since the new pension freedoms were announced last year there has been growing speculation that something was in the pipeline to offer an escape route for those who had committed themselves to inflexible annuity contracts before the new rules were announced.

However, while this is an attractive pre-election gesture to a disaffected group there is a relative lack of clarity about how (or if) the system would actually work in practice. Whilst the aim of allowing annuitants to exchange their income for a cash sum or a flexible drawdown contract or flexible annuity is straightforward enough in principle there are problems in practice.

Firstly the Government has confirmed that a second hand market will be created for annuity sales, along similar lines to the existing second hand endowment market, and that current annuity providers will not be able to buy back their own products.

Such buyers, should they materialise, will clearly only be prepared to buy at commercially attractive rates with a high probability of profit, and there will inevitably be costs for advice and administration which will make have to be taken into account. Indeed, the Budget document itself notes that "For most people, continuing to hold their annuity will be the right decision."

What's more, unlike second hand endowments, annuities are based on life expectancy and therefore don't have a definite end date which in turn will make it very difficult to value them. Lifestyle and health will be factors in how valuable the annuity will be to the new purchaser and there has been speculation that buyers may require regular medicals or even attempt to restrict some potentially dangerous hobbies to try to ensure "value for money".

All in all we currently have more questions than answers and I have serious reservations about how this market will develop in practice. Of course, it couldn't just be a case of electioneering could it?

Robin Sainty APFS M.A. (Cantab)