Buying annuities direct.

penrhyn

I have a small pension pot which will mature at the end of the year.
I've had a letter suggesting I look at the open market option, which should be done via their approved IFA's. They will of course charge an fee.

The naive question is whats so hard about compiling a list of annuity quotes and picking the best one yourself, or is it a closed shop?

dunstonh

I've had a letter suggesting I look at the open market option, which should be done via their approved IFA's. They will of course charge an fee.

Why do you assume the IFA will charge a fee?

The naive question is whats so hard about compiling a list of annuity quotes and picking the best one yourself, or is it a closed shop?

Main issues are:
1 - many providers will not retail direct to public
2 - those that do retail direct to public will keep the commission they pay the IFA for themselves.
3 - The annuity rate the IFA gets (thanks mostly to economies of scale) is usually better than the direct offering. Plus, IFAs can haggle rates with a number of providers.

Back on the fee point, large pots are usually worth doing on fee basis but using the commission system to pay the fee (as the provider effectively spreads the fee over the life expectancy). Small pots are better on commission and a fee based adviser may not offer best value.

bigfreddiel

dunstonh wrote: »

Why do you assume the IFA will charge a fee?

will an ifa do it for free then?

John28_2

IFAs who don't charge for advice. I must be dreaming.

bigfreddiel

John28 wrote: »

IFAs who don't charge for advice. I must be dreaming.

thats what i thought - yep - you're right - just pinched myself and woke up!

Loughton_Monkey

Annuities are still largely marketed on a 'commission' basis by IFA's. As has been said, companies that deal direct will not rebate commission to a retail customer.

So a trip to your local IFA won't do any harm. Also worth finding one who'll do you a quote over the Internet.

Once you've bought [apart from cooling off period] you have literally locked yourself in for the rest of your life. Hence even a few shillings extra can really add up. So it's vital to shop around.

atush

John28 wrote: »

IFAs who don't charge for advice. I must be dreaming.

Annuities pay a commission, full stop. If the IFA doesn't get it, the company keeps it. What is so hard to understand about this? The IFA will get paid what the annuity provider would have pocketed. The OP will save NOTHING by going direct, but could in fact gain with an IFA. Because the IFA may be able to get a better deal, and if not, they are paid by the provider, Leaving the OP no worse off. So got he IFA route, esp if you can find one who will work commission only on this.

Sometimes you IFA bashers out there (and no I am not one nor do I know one personally) sure don't seem to be able to get your facts straight. It is like the blind leading the blind:rotfl:

SallyG

How can you judge whether your IFA has got you a better/the best deal?
You'd have to go to 3 or 4 different IFAs to get different quotes to compare?

penrhyn

Thanks all for the info, the IFA's being recommended is Alexander Forbes?

atush

SallyG wrote: »

How can you judge whether your IFA has got you a better/the best deal?
You'd have to go to 3 or 4 different IFAs to get different quotes to compare?

For a start, you can check your pension provider- they give you a quote when you say you will take retirement. Then you can call others who sell direct to the public.

If the IFA can better this great. And in the case of enhanced annuity (ie better rates if you have some diseases or conditions) you need a specialist IFA who will undoubtedly get you a better rate than going on your own.'

In some cases, if you have a larger pot, your IFA can get two providers bidding against each other for your business. May only mean a few hundred extra per year, but every littel helps.

Nearly_Old

Having recently (3 months ago) been through the process I can describe my experience; firstly some background:

Last year (age 62) there were continuing redundancies and rather than just wait I spoke to HR to try and find out where I stood in the scheme of things. After a number of meetings I accepted redundancy at the end of Oct and turned it into early retirement.

I had an old index linked DB scheme that was available plus my state pension is due Apr 2014. My wife is retiring this coming Sep and she will have an index linked DB pension and her state pension starts in Jan 13. The 2 employers I had after leaving the public sector operated DC pension schemes so I had 2 pension funds with different providers.

As a starting point I contacted both the scheme providers for an estimate of what was available from each of the funds - just say they were both disappointing. Next port of call was the internet using a number of the on-line annuity calculators. As I have a couple of qualifying medical I got both normal and impaired quotes and there were some significant differences.

Then contact our IFA. First thing he did was to go through all the numbers (retirement budget, pension funds, savings, etc) and because of the other index linked pensions showed that I could also consider a level annuity. We also discussed the choice between an annuity and drawdown to make sure that all the option had been covered. I then completed a general qustionnaire that the IFA sent a number of providers - including some that I had got quotes from. When he got some numbers back we discussed these and negotiated with two of the providers. I then completed a further questionnaire for the chosen supplier (Just Retirement), the funds were transferred and I'm now receiving payments.

For an impaired level annuity, 10 year garuantee, 50% spouse benefit the actual annuity is around £1,600 pa better than the best quote I got from the on-line calculators. The IFA's fee was 1% of the net value of the pension funds; or £2,100.

For me personally there were also other non-financial benefits; e.g being able to go back and re-visit the drawdown/annuity issue, an outsider's look at the retirement budget, being given the confidence that yes it will work so get on and enjoy yourself.