Protection for the rights of dependents and beneficiaries particularly vulnerable older people must be cemented before secondary annuity market plans go ahead, the ABI says.

The organisation has called on the Government not to ‘rush’ the implementation and also warned that security against scams must also be addressed fully.

Plans to allow the re-selling of existing annuity contracts were confirmed as part of the Budget earlier this year.

The move has been described as an extension of the new freedoms.

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The policy has attracted some fierce criticism but the ABI expressed its support in principle.

Annuities proposal 'crazy' - Aegon chief

The ABI has told the Government what its members believe is needed to ensure the proposals deliver for customers. The body said clarity is needed around:

• How the rights of dependents and beneficiaries will be protected, particularly as many of them will be older people who may be vulnerable due to illnesses and reduced mental capacity.

• How people will be protected from scams and fraud.

• The exact scope of the proposals, which must be well defined, so that consumers are clear about exactly what is included.

• Whether consumers are allowed to sell their annuities back to the provider they originally bought them from, recognising that providers are not obliged to ‘buy back’.

Dr Yvonne Braun, director of long term savings strategy at the ABI, said: “The Government’s proposals to create a secondary annuity market will potentially extend the reforms, and we want them to work for customers. Naturally there are considerable challenges in establishing a functioning market, and many unresolved complex legal, regulatory and prudential questions.

“We want to work with Government to help resolve these issues, but given the lessons learned from the reforms and the need for clarity in many areas, we urge the Government not to rush these proposals through for 2016. Allowing more time will ensure an appropriate regulatory regime can be developed to give this new market a chance to succeed.”

The National Association of Pension Funds has warned a secondary annuity market risks being “imbalanced and overly expensive”.

secondary annuity market risks being “imbalanced and overly expensive”

The NAPF, which has 400 members from businesses supporting the pensions sector, fears that the creation of such a market may be so expensive as to greatly reduce the value available to most annuitants.

David Flory, director of strategic accounts at Aegon UK, told the recent IFP Paraplanning Conference the proposal was "a chance for someone to get ripped off again".

He said: "It sounds lovely as a sound bite but when you start lifting the bonnet and consider it... it's crazy, it really is crazy and does cause me great concern".

He added: "Let's hope that gets canned quickly."