Cost of using a IFC for an annuity

dunstonh

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

no they dont

is the fee proportional to the fund size?

Any fee can be proportional to the fund size whether it is 1p, £100 or £1000.

doubleJackD

dunstonh wrote: »

no they dont

Any fee can be proportional to the fund size whether it is 1p, £100 or £1000.

so to sum up the IFA gets a commission when the pension fund is handed over to the annuity company? And it's the annuity company that pays the commission from the pension fund pot?

i thought the FSA were doing away with commission?

what are the IFAs doing to justify their commission? it seems a lot of money they are getting for just finding the highest paying annuity.

after all there are numerous web based car insurance comparison sites, i would have thought it better if the FSA started such a site for annuities, people would just enter in their age/ postcode/ annuity requirements and the different annuity companies could quote for the business.

sandsy

doubleJackD wrote: »

so to sum up the IFA gets a commission when the pension fund is handed over to the annuity company? And it's the annuity company that pays the commission from the pension fund pot?

i thought the FSA were doing away with commission?

what are the IFAs doing to justify their commission? it seems a lot of money they are getting for just finding the highest paying annuity.

after all there are numerous web based car insurance comparison sites, i would have thought it better if the FSA started such a site for annuities, people would just enter in their age/ postcode/ annuity requirements and the different annuity companies could quote for the business.

The FSA ARE doing away with commission. So at the moment, if you have £50k to buy an annuity, and the commission is, say, £750, the annuity provider effectively uses a figure of £49,250 to calculate the annuity income.

Once commission is gone and your adviser charges you £750 directly (but this can still be paid through the product), the annuity provider receives your £50k, pays across £750 to the adviser and uses the remaining £49,250 across to the adviser. Spot the difference?!

Why do you think it's a lot of money? How much do you think you should pay for professional advice, from a qualified advisor?

There are annuity comparison websites online. The old FSA one is now run by the Money Advice Service:

http://tables.moneyadviceservice.org.uk/Comparison-tables-home/Annuities/Compare-Annuities/

However, comparison sites can't quote for impaired annuities.

dunstonh

so to sum up the IFA gets a commission when the pension fund is handed over to the annuity company? And it's the annuity company that pays the commission from the pension fund pot?

If you go with commission option then yes.

i thought the FSA were doing away with commission?

They are

what are the IFAs doing to justify their commission? it seems a lot of money they are getting for just finding the highest paying annuity.

The IFA is providing advice as well as retailing the product.

after all there are numerous web based car insurance comparison sites, i would have thought it better if the FSA started such a site for annuities, people would just enter in their age/ postcode/ annuity requirements and the different annuity companies could quote for the business.

The FSA has no remit to provide retail services to the public. Also, if you relied upon the FSA tables for your research then you wouldnt get the best option. Their own data only provides data on RRP and has no adjustment for economies of scale which an IFA can get.

There are some sites that do provide a limited panel of providers on a DIY basis but people on this site have posted that their local IFA came in with better terms.

Velcro_Hotdog

doubleJackD wrote: »

so to sum up the IFA gets a commission when the pension fund is handed over to the annuity company? And it's the annuity company that pays the commission from the pension fund pot?

i thought the FSA were doing away with commission?

what are the IFAs doing to justify their commission? it seems a lot of money they are getting for just finding the highest paying annuity.

after all there are numerous web based car insurance comparison sites, i would have thought it better if the FSA started such a site for annuities, people would just enter in their age/ postcode/ annuity requirements and the different annuity companies could quote for the business.

You can do that already

My old man did the same and got an income or around 3k quoted. He then asked an IFA who got him £500 a year more. The IFA gave a few reasons why he got a better rate

1) The IFA rebated some of the commission back (increasing the rate)
2) Took a more detailed medical questionnaire to the underwritters (increased the rate)
3) The IFA in question was able to haggle with the providers and play them off against each other (increacing the rate)
4) The provider used does not deal with the public direct and provided much better rates than the insurance companies that do
5) Did all of the paper work, chased the transfer, kept him informed via phone and email every couple of days on the progress (which saved my dad a lot of time)

So my dad gets £500 a year more income for the rest of his life, the IFA got paid for doing his job and they are both happy