Cost of using a IFC for an annuity

yorksguy11

Im in disscussions with a IFC about buying an annuity. I had a free meeting with him which i thought was very good and explained my best options after going through all my finances.
He has given me the options of either paying through commision which im not keen on. A fee of 2% or a combination of both.

I was wondering as i would prefere to pay a fee is this about the going rate. Or can you try and haggle with themto get a better deal.

Thanks Nigel

dunstonh

He has given me the options of either paying through commision which im not keen on. A fee of 2% or a combination of both.

Most people do commission on annuity purchase unless it is a large fund as it is the most logical option. It is one of the few areas that actually is better on commission.

I was wondering as i would prefere to pay a fee is this about the going rate.

Most providers pay a commission between 1% and 1.5%. So a fee of 2% is above the commission rate. If the fund size is low, then that would make sense. If its high then it would not.

Or can you try and haggle with themto get a better deal.

Depends on your fund size.

yorksguy11

The fund size will be around 150k. My worry is that on commision they will take money every year for the length of annuity which will eat into it.

dunstonh

My worry is that on commision they will take money every year for the length of annuity which will eat into it.

That isnt how it works. It is a fixed amount of the 75% fund value (assuming 25% is taken as tax free cash).

So, on a fund of £150k, that would be an annuity purchase using £112,500 and a 1.5% commission rate would be £1687.50 paid on commencement but nothing after that.

yorksguy11

So i only pay on the annuity part not the full pension value. The cash part dosent count.

Thanks for your help.

atush

On a fund over 100K, I would think that the 1.5% is the going rate, and I would not expect to have to pay 2%.

So negotiate with him, and if he will not- find another via recommendation of www.unbiased.co.uk.

Be aware, that you will not save on commission should you try to arrange your own annuity. As the commision will be simply retained by the firm who sells you the annuity. And an IFA should be able to get you a better annuity rate than you can get yourself as they can 'haggle' with several different firms.

yorksguy11

Thanks for your answers guys
I have the option of paying a fee myself or commision. Is there likely to be a difference between them will the ifc round them up to the same.
And this might sound a silly question, but with the figures involved i presume there will be no vat on top.
Thanks again

dunstonh

I have the option of paying a fee myself or commision. Is there likely to be a difference between them will the ifc round them up to the same.

Personally, on these, I agree the fee but collect it via the provider as that makes the most economic sense as you effectively pay the fee over 20 odd years (or the anticipated life expectancy) rather than upfront. I think 1% to 1.5% would be the going rate. 2% starts getting a little expensive but not really in greedy category. City based advising firms or those where you are outside of their normal target market tend to be more expensive than say more rural firms.

And this might sound a silly question, but with the figures involved i presume there will be no vat on top.

It is not a VATable transaction.

doubleJackD

dunstonh wrote: »

Personally, on these, I agree the fee but collect it via the provider as that makes the most economic sense as you effectively pay the fee over 20 odd years (or the anticipated life expectancy) rather than upfront.

is it a bit like trail commission then?

dunstonh

is it a bit like trail commission then?

Not even close.

doubleJackD

dunstonh wrote: »

Not even close.

does the IFA collect the fee over the life on the annuity or not?

is the fee proportional to the fund size?