Phoenix Life has announced it will offer selected customers with small annuity payments the chance to cash it in for a one-off lump sum.

It will be available to a group of Phoenix customers between the age of 55 and 85, who hold an annuity that does not exceed £300 a year, provided that the calculated value does not exceed £2,000. The criteria also notes that it should have been taken out before the introduction of the pension freedoms, when it was compulsory to purchase an annuity.

This announcement follows a successful exercise carried out by Phoenix in 2013. The company is able to make this offer due to existing small pot legislation, and it has nothing to do with previous plans by the government to create a secondary annuities market, which was scrapped in Autumn 2016.

Commenting on the annoucement, Phoenix head of retirement propositions Danny Dowd said: “We recognise that many of our customers have annuities which provide very small regular income payments. This scheme offers them a choice which they will unlikely have had before – to take a one-off lump sum now or continue to receive their annuity payments.”

Phoenix will start to offer this option to a group of eligible customers from November 2017. The amount Phoenix is offering will reflect all the potential future benefits that might be expected under the policy. Customers will be able to opt for this via one straightforward claim form (including an online option from January 2018), and they will have six weeks to consider whether to take up the offer.

Customers who want to continue with their annuity do not need to do anything and there will be no changes made to their policy. Each customer will receive a clear personal outline of the amount they could receive and the tax implications of acceptance.

Phoenix is also recommending policyholders speak to The Pensions Advisory Service, who are available to speak to customers and provide independent guidance, if they are unsure of what to do next, or to seek independent financial advice.

“Offering customers the option of taking a one-off lump sum is a win-win situation. It offers customers a greater degree of control, but also enables us to free up resources that go into administrating small annuities,” Dowd concluded.

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