Interactive Investor

Can I cancel my annuity and take a lump sum?

15th May 2019 13:41

Helen Morrissey from interactive investor

Loading

Share on

Q

“I have a small pension through an annuity, which I am advised is worth £28,500. Under the government scheme, I would like to take this as a trivial commutation lump sum [ie, cash in the lump sum].However, I have another small annuity which is £113 a year, which takes me over the £30,000 threshold.I am told I cannot cancel the annuity. Is there any way that I can cancel it in order to access the lump sum?”

From: AS/Swadlincote

A

Unfortunately, the decision to purchase an annuity is, in the vast majority of cases, irreversible so you would be unable to cancel it. At one point the government did announce that it was looking at plans that would allow people to cash in their annuities – the so-called secondary annuity market – but these were dropped in 2016.

In terms of your other small pot, you do not mention if it is a defined contribution (DC) or defined benefit (DB) pension but you do have options. If the pension is a DC one, then under the pension freedoms that came in in 2015, you would be able to take it as a cash lump sum less any tax due if you are over the age of 55.

If you have a DB plan, then you would need to do a DB to DC transfer if you wanted to be able to take your money as outlined above. Under current rules, you would not have to pay for regulated financial advice to make this switch as your pension is worth less than £30,000.

However, you may find that many providers will refuse to do a non-advised transfer so you may have to shop around.

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up