Annuity purchase help needed

Dustykitten

Hi, this is my first post so please bear with me. I have tried to find the answer myself from previous messages and websites but without success.

My father died 18 months ago before he retired. After a very drawn out process his company pension (with AXA) paid out a lump sum to the discretionary trust we set up. They failed to mention the Protected Rights Pot which they still had but as the payout was less than I had expected I have been chasing it for months and they have finally agreed (after I wrote to the chairman to complain) that they 'made an admin error' and can now offer Mum an annuity. I think I can use another provider which is what I would like to do as I have no faith left in AXA and the amount is not very generous. My problem is Mum has a real distrust on Financial Advisors after a bad experience years ago. I know that once made the decision cannot be changed. Any tips on how I can compare deals myself?

I tried Annuity-bureau but was not keen on the idea of registering all the info.

Thanks in advance

dunstonh

My problem is Mum has a real distrust on Financial Advisors after a bad experience years ago

There are 30,000 advisers out there and she distrusts them all because of the actions of one individual. Harold Shipman murdered people. Does that make all doctors murderers?

Any tips on how I can compare deals myself?

You can check the FSA tables for basic information but the tables are not updated frequently and make a number of assumptions. Even when IFAs get comparative quotes we then have to go direct to the providers to get real quotes which are usually different to those quoted on the list. A number of providers will only deal with FSA authorised individuals so you will be limiting the options if you do go DIY.

Open market options are on of the easiest transactions for an IFA to do. Its a no lose situation for all involved. Your mum will either get the highest income from the available providers, all the paperwork completed (which is quite heavy and confusing since April 2006) and consumer protection for best advice given.

EdInvestor

Have a look at the FSA site at first anyway, to see roughly what to expect.

https://www.fsa.gov.uk/tables

You can get online quotes from other people, eg https://www.hargreaveslansdown.co.uk but you will have to give them the info first.

Try Googling for other firms which will quote online. After collecting all these quotes it ought to be possible to detect any bad behaviour by an advisor.

caveat_emptor

Dk, your mum can expect to get about 6% on single life level annuity at age 60, 6.6% @ 65 and 7.5% @ 70. Any health issues could increase these numbers. Current top payers are Canada Life and Norwich Union.
Take a look at Moneyfacts and Annuity Direct websites for options and examples. You can get a quote on AD with minimum of info.
If you involve an IFA make sure he tells you how much it will cost you and how much he makes from to set up. Beware anyone who wants to charge you commission without giving you a fee option.

dunstonh

Dk, your mum can expect to get about 6% on single life level annuity at age 60, 6.6% @ 65 and 7.5% @ 70. Any health issues could increase these numbers. Current top payers are Canada Life and Norwich Union.

I have done several OMOs in the last few weeks and NU and CL didnt come out top on any of them. This is the problem with the quote portals/FSA tables. On one NU came out top on the comparison but when I got the "real" quotes from the top 4, NU came out 4th. NU have just lowered their annuity rates and its probable that they are being sluggish at updating the quote portals/FSA tables which is not an uncommon occurance.

If you involve an IFA make sure he tells you how much it will cost you and how much he makes from to set up. Beware anyone who wants to charge you commission without giving you a fee option.

Under FSA rules you cannot use the term independent unless you give a fee option. With open market options, you often find the fee option is more expensive than commission as most mainstream annuity providers pay 1% commission on annuities. Some go to 1.5% but that is often due to enhancement based on turnover which has no impact on the annuity income.

The annuity illustration shows any commission that is payable.

Dustykitten

Thanks for all the help offered so far, I will visit some websites later and see if I can get some quotes. I already have the figure AXA quoted so have something to compare with. Does anyone know if I will be charged a fee for taking the money out of AXA or do all companies have different rules?

CE - I too am named after my cat!

EdInvestor

Does anyone know if I will be charged a fee for taking the money out of AXA

No, everyone has the right to shop around, aka the "Open Market Option."

caveat_emptor

dunstonh wrote:

I have done several OMOs in the last few weeks and NU and CL didnt come out top on any of them. This is the problem with the quote portals/FSA tables. On one NU came out top on the comparison but when I got the "real" quotes from the top 4, NU came out 4th. NU have just lowered their annuity rates and its probable that they are being sluggish at updating the quote portals/FSA tables which is not an uncommon occurance.

Thanks for the update.

dunstonh wrote:

Under FSA rules you cannot use the term independent unless you give a fee option. With open market options, you often find the fee option is more expensive than commission as most mainstream annuity providers pay 1% commission on annuities. Some go to 1.5% but that is often due to enhancement based on turnover which has no impact on the annuity income.

The annuity illustration shows any commission that is payable.

I don't know how long this FSA rule has applied but some time ago fell foul of a 'reputable' IFA who did not give me the fee option. I later found out that the fee option would have been considerable lower cost than commission. I kicked myself at the time, hence the warning about getting both fee and commission costs.

dunstonh

The rule came in July last year and is required to be documented on the IDD/Menu which should be issued at first contact.

I wouldnt be surprised if some "bypass" the reading of the doc but on the whole I see no reason why it should be bypassed.