Pension annuity rate

Velcro_Hotdog

fairleads wrote: »

Its called churning - typically advised by IFAs to increase/continue their income stream at your expense.

Or people looking to take advantage of the tax relief

gadgetmind

lindabea wrote: »

I'm concerend that if I were to invest in a further pension for him, if he were pre-decease me, I may lose the investment or at the very least, may not turn out as a sound investment.

If he dies before drawing the pension, you get the pot, after this it depends on what kind of annuity he takes out.

You haven't mentioned income, but bear in mind even if not working, he can put £240pcm into a pension, which HMG make up to £300. When he draws the pension, 25% is tax free, and the rest can be used for an annuity. Of course, you'd need to work out how large this would be and what his tax situation would be once state pension kicks in.

If you go the ISA route, you don't get the tax advantage going in, but you get 100% tax free later.

Of course, you could do some of each. What is important is that you don't get used to living off that nice annuity 100% as inflation over the decades isn't your friend.

fairleads

Velcro_Hotdog wrote: »

Or people looking to take advantage of the tax relief

I don't believe there would be a taxrelief advantage in this case.

Loughton_Monkey

lindabea wrote: »

Your assumption is quite correct. The rate quoted is for a single life level annuity. If I include my partner or have any payment guarantees, the rate drops significantly. I need to decide whether to pay an IFA to see if he can get me better rates, but my own enquiries on websites have led me to believe that I will not be able to achieve a higher rate - which leads me to believe that any money I pay to an IFA may not be cost effective. Any advise please.

Generally speaking, you do not "pay" an IFA to find a better annuity rate. They work on commission for annuities (usually).

But I must say that to go into an IFA and ask for a "better" rate than 9.25% would be treated as taking the pi55 in a huge way.

Why not go to a car dealer and say "My brother got drunk and promised to sell my his 2 month old Bentley for £50. Can you do it cheaper?". It would meet with the same reaction. So don't embarrass yourself.

atush

If you are a woman, is it more unlikely your OH will be left behind after you die as women tend to live longer all other things being equal. But do take into acct your family histories and state of health now.

And if your OH has a pension of his own, I would take adantage of your GAR.

dunstonh

But I must say that to go into an IFA and ask for a "better" rate than 9.25% would be treated as taking the pi55 in a huge way.

It would be hard nowadays, even with enhanced rates. Impaired rates could. However, many of these plans with GARs still pay the IFA if an IFA is used.

As already mentioned above, some of these plans with large GARs also insist on them being paid a certain way. It is not uncommon to see single life basis, annually in arrears with no guarantee period for example. So, there could be risks taking it the default way. Some will allow other methods and apply a pro rata guarantee rate whilst some wont.

lindabea

dunstonh wrote: »

It would be hard nowadays, even with enhanced rates. Impaired rates could. However, many of these plans with GARs still pay the IFA if an IFA is used.

Thank you Dunstonh for your reply. I'm coming to the conclusion that under my circumstances,I have nothing to gain and possibly more to lose if I use an IFA, as
1 He will not be able to better the rate (That has already been established)
2 If part of the fund is used to pay the commssion, I could end up with less than going direct.

Are there any benefits that I may be overlooking by approaching an IFA to deal with this matter or would I (as I suspect) be wasting my money.

lindabea

Loughton_Monkey wrote: »

But I must say that to go into an IFA and ask for a "better" rate than 9.25% would be treated as taking the pi55 in a huge way.

This is exactly why I'm somewhat reluctant to engage and IFA. I could end up spending money for no benefit. I already had a preliminary meeting with an IFA and he wants to charge me £400 for his services. This is before I found out that there is a GAR on my policy.

dunstonh

Thank you Dunstonh for your reply. I'm coming to the conclusion that under my circumstances,I have nothing to gain and possibly more to lose if I use an IFA, as

I see it the other way around. If the IFA cannot beat it (which is likely) the IFA will be paid by the existing provider (in most cases). If they can beat it then you get a better rate and the IFA gets paid by the new provider.

2 If part of the fund is used to pay the commssion, I could end up with less than going direct.

If you dont use an IFA, then you do not get the commission. It is kept by the company themselves.

I already had a preliminary meeting with an IFA and he wants to charge me £400 for his services.

Often in these cases, it is not worth doing it on fee basis as you have nothing to gain on fee basis with annuity. You dont say how much the pension fund is. A big fund could be worth doing on fee basis where the fee is collected via the annuity provider and any surplus used to improve terms. However, with a GAR that would not apply. The IFA may have said there was a £400 if you had a provider that does not pay the IFA a commission or if the amount of the fund is too small to cover costs.

lindabea

dunstonh wrote: »

I see it the other way around. If the IFA cannot beat it (which is likely) the IFA will be paid by the existing provider (in most cases). If they can beat it then you get a better rate and the IFA gets paid by the new provider.



If you dont use an IFA, then you do not get the commission. It is kept by the company themselves.



Often in these cases, it is not worth doing it on fee basis as you have nothing to gain on fee basis with annuity. You dont say how much the pension fund is. A big fund could be worth doing on fee basis where the fee is collected via the annuity provider and any surplus used to improve terms. However, with a GAR that would not apply. The IFA may have said there was a £400 if you had a provider that does not pay the IFA a commission or if the amount of the fund is too small to cover costs.

I think I still do not understand how this commssion works. When I raised this issue in another thread, this was your reply:

He is correct. Who do you think pays for the commission if you dont? The amount of the commission is factored into the annuity rate.

(Sorry - I don't know how to paste a link to the thread) However, this implies that if the IFA takes a commission, then my pension amount could be reduced accordingly. Can you pls elaborate more on this?