Pension experts have urged the government not to listen to recent calls to revive the idea of a secondary annuity market, saying the reasons for scrapping the proposal in the first place were still valid today.
Several pension experts warned of consumer and provider detriment should this market be created, due to the risk of fraud and problems with pension valuations.
Calls for the introduction of a secondary annuity market, which had been put to bed in 2016, were revived by Stephen Lloyd, Liberal Democrat spokesman for work and pensions, last month, when he wrote to secretary of state for work and pensions Esther McVey arguing consumers were losing out.
Mr Lloyd said above-target inflation and low yields on the 10-year government bond, which annuity rates are typically priced on, meant the income received by annuitants had less purchasing power now than when the product was bought.
A secondary annuity market, first proposed in December 2015, would allow people drawing annuities to sell their contracts, extending to them the pension freedoms implemented three years ago.
But consumer protection concerns led the Treasury to scrap the plans in October 2016 just months before their implementation.
Simon Harrington, senior policy adviser for public policy at Personal Investment Management & Financial Advice Association (Pimfa), told FTAdviser the government's decision to scrap the proposals was the right one.
He said: "In 2016, we argued that there was limited adviser appetite to serve this market and as a result, the demand for a secondary annuity market among consumers would likely outstrip the availability of advice to service that demand.
"We still hold this belief to be true and, given that none of the risks of consumer detriment outlined by others have subsided, do not believe that you can reasonably argue for the resurrection of a policy that has long been consigned to history."
Steven Cameron, pensions director at Aegon, said nothing that happened in the past three years had made the challenges to the annuitant, annuity providers and potential third party purchasers "any less significant".
He said: "In many ways, selling an annuity for cash or a transfer into drawdown, which means giving up a guaranteed income for life, is similar to transferring from defined benefit to defined contribution, and would certainly not be right for everyone."
He said the complexity in assessing whether a fair price is being offered meant advice was necessary for such transactions.
He added: "Advice, of course, costs and individuals would have incurred further costs being medically underwritten as third parties would need to have an indication of their likely lifespan to be able to come up with an appropriate purchase price. Together, these costs would have made encashing small annuities unfeasible."
David Robbins, senior consultant at Willis Towers Watson, meanwhile pointed to risks for the government.
He said: "The government probably calculates that it would get more blame if people did not like the prices offered and thought they were being 'ripped off a second time'."
