The news of the government's plan for a new second-hand market in annuities has been greeted with caution.

From April 2017, the Treasury will remove tax rates as high as 70% - which had effectively closed the secondary market in annuities.

More than five million people own annuities paying out around GBP 13.3bn of income a year, according to the Evening Standard, which says the capital value of those annuities is estimated to be around GBP 200bn.

The change in the annuities market is the latest shake up as part of the government's pension freedoms.

While the ability to sell may appeal to some pension holders who feel trapped in a product they didn't want to buy, the opening up of a secondary market is likely to be complex.

Douglas Anderson, partner at independent consultancy Hymans Robertson, said the biggest surprise in the announcement was that providers of policies will be able to buy them back from policy holders.

"This will definitely make it easier to establish a more competitive market as the original providers may be able to offer better terms due to the expense and capital savings of the original policy," he said.

The government has set out a robust framework to ensure that consumers are protected and that a secondary annuity market is functional – but some details are still to be worked out, such as how people work out whether they are getting a good deal when selling their annuity.

Gareth Shaw, head of consumer affairs at Saga Investment Services, said: "The government has recommended the development of a tool or calculator, but what happens to people who aren't digitally engaged but want to sell their annuity?"

Extending Pension Wise, the government's pension advice service, is a helpful first step but more needs to be done, Shaw added.

"It's vital the next consultation on the annuity market works to create strong links between Pension Wise and the advice industry."

First published 17.12.2015

Lindsay.sharman@wilmingtonplc.com