£100k for an annuity, what rate should I look for?

dunstonh

I see you use the phrase "you chose" , so your clients decide you dont advise them?

What do you think the A in IFA stands for?

You cannot railroad people into an option. With many things it is a judgement call where you narrow the options down. If the person says they dont want investment risk then you dont go with drawdown even if financially it is the best option. Better they are aware of the options and the discussion can include the pros and cons to make that informed decision rather than be told nothing and given an option that may not be suitable.

jamesd

ajw1100 wrote: »

2. Go for an annuity giving my wife 50% after my death if my luck is going as normal (See above).

You know that your wife will inherit 100% of your pension pot and its income if you die while using income drawdown? It's one of the substantial advantages that income drawdown offers over annuities: more money for the surviving spouse, without any reduction in income while they are both alive.

ajw1100 wrote: »

In 2013 I will get my state pension and could live on savings until then if this would be to my advantage and then buy an annuity.

Annuity rates do tend to rise over time and they are depressed at the moment also by quantitative easing. One short term advantage of drawdown is that you can probably take out more income between now and when the state pensions start than you could with an annuity, so it would be better for the next couple of years.

I know you've had a bad experience with one IFA but perhaps you could ask for assistance here in checking any investment options that are suggested for drawdown for a few years?

There's no £200,000 minimum needed for income drawdown. It's just a number that I think came from an annuity reseller. £10,000 could be fine for it if that was what was available. It depends on how vulnerable the person is to income variation and capital variation. Someone with absolutely no safety margin might be better taking a lower annuity income to avoid the chance of a drop. Someone with sufficient income might choose drawdown to get a higher income and not be worried about a drop from £20k a year to 19k a year instead of £15k a year from an annuity with 75% spousal payment and 3% inflation increase (drawdown includes inflation protection, via the investments chosen, and 100% spousal pension).

It's also not necessary to go only for one option. You can use part annuity and part drawdown if you like.

Given your situation one popular type of option that might be interesting is called phased retirement. In this you take the lump sum and buy an annuity with part of your pension pot. You live on the lump sum and annuity income. Repeat for the three years until you get the state pensions. Then you get the higher income because of the state pensions and may be in a position to accept the investment variability of drawdown for the rest of your pot. Or could continue to put say £5k or 10k a year into an annuity. Or spend it all on an annuity if you like, but I'm reluctant to go with that because you have a spouse and drawdown provides the best deal for a spouse.

I agree about looking elsewhere for an IFA. Seems that the one you have isn't really doing a good job of explaining things to you.

Cautious_Investor_3

feesarefare wrote: »

What I have noticed more and more on these forums is people looking for advice after they have seen a IFA, which doesnt really say much for the sector as a whole.

I'd agree, hopefully RDR will help to raise standards with some of the dinosaurs deciding that they cannot be bothered to improve their qualifications or change their business models and fade away into the background.

The Cautious Investor

ajw1100

A very LARGE thank you all for your constructive comments, I obviously need to do some more digging into my options, the part annuity part drawdown seems to be a good idea. I will dust of Excel and see what the figures show.

I now intend to get quotes from all the main providers and not leave this to my IFA.

I will be out today so will investigate later.

Once again thanks for your comments.

Don't go away.....;);)

dunstonh

I now intend to get quotes from all the main providers and not leave this to my IFA.

That is largely pointless as the IFA figures will at worst match those but some will beat the direct figures (especially if you use an IFA on fee basis where all will beat the direct figures). Most of the main players in this field do not provide quotes direct to public. I am not sure what you will achieve by doing this.

feesarefare

dunstonh wrote: »

You cannot railroad people into an option. With many things it is a judgement call where you narrow the options down. If the person says they dont want investment risk then you dont go with drawdown even if financially it is the best option. Better they are aware of the options and the discussion can include the pros and cons to make that informed decision rather than be told nothing and given an option that may not be suitable.

Railroading doesnt come into into it.

How do you do a suitability report if you dont ultimately make a recommendation to the client?

If I understand you correctly your suitability report would say something along the lines of "having considered all the options detailed above it was agreed an annuity would be the best option.
Therefore I have listed three options below for you to choose from"

Whereas I would expect an IFA report to say something along the lines of

"having considered all the options detailed above it was agreed an annuity would be the best option.
Therefore I recommend you purchase a level annuity with a 5 year guaranteed and 50% spouses pension as this will best meet your needs as described above. I recommend X Life as they are offering the highest annual pension in style required etc etc."

I dont see that as railroading, just doing what the client expects/deserves.

dunstonh

How do you do a suitability report if you dont ultimately make a recommendation to the client?

Simple, you give the advice on what you are doing and list the alternative potential options and why you are not doing those.

However, you have had to have had some discussion along the way to end up with the advice being given and the reasons why options have been eliminated. Some options are easy to eliminate, others require a judgement call. The discussion at the end may be to decide jointly which option is the most suitable as that way you make sure the person knows what they are doing. That has to be better than an IFA saying "you will do this" and not discussing the alternatives.

feesarefare

dunstonh wrote: »

Simple, you give the advice on what you are doing and list the alternative potential options and why you are not doing those.

However, you have had to have had some discussion along the way to end up with the advice being given and the reasons why options have been eliminated. Some options are easy to eliminate, others require a judgement call. The discussion at the end may be to decide jointly which option is the most suitable as that way you make sure the person knows what they are doing. That has to be better than an IFA saying "you will do this" and not discussing the alternatives.

do us a favour and re read my last post as think you have totally missed my point. I have quite clearly said you discuss the options "having considered all the options detailed above" (and made your judgement calls) its just you (the IFA) ultimately have to make a recommendation , not leave the client with a number of "choices", as appears with the op here -level , spouses pension etc.

dunstonh

feesarefare wrote: »

do us a favour and re read my last post as think you have totally missed my point. I have quite clearly said you discuss the options "having considered all the options detailed above" (and made your judgement calls) its just you (the IFA) ultimately have to make a recommendation , not leave the client with a number of "choices", as appears with the op here -level , spouses pension etc.

You are the one that decided to pick apart what I said in post 18 with your interpretation of that. However, at no point have I said to leave the client with a number of choices.

Domain.Rider

A quick comment on the online annuity tables - especially the FSA website tables. When I looked for an annuity recently, I checked these tables and picked the best rate from them. When I went to my IFA for confirmation, he checked the rates on his system and found that several of the FSA table rates were incorrect (out of date?). He found me a rate much better than the top rate on the FSA tables.