Annuity commission

zagfles

dunstonh wrote: »

HMRC never used to allow commission rebates. It is a relatively new thing.

However, with RDR killing off commission and making it an explicit charge which is deducted from the pension pot, that may not be acceptable to HMRC if that was refunded to a client.

I thought "commission" was still allowed on non-advised?

dunstonh

zagfles wrote: »

I thought "commission" was still allowed on non-advised?

It is still allowed. However, what a number of providers have done is allow the non-advising firm to tell them what commission they want to be paid and then deduct that commission payment from the fund as an explicit charge rather than it being factored into the annuity rate. So, whilst it fits with the regulatory position on commision, HMRC may take a different view. Not saying they will but if you treat fee and commission the same way, then at what point is one acceptable but not the other?

zagfles

dunstonh wrote: »

It is still allowed. However, what a number of providers have done is allow the non-advising firm to tell them what commission they want to be paid and then deduct that commission payment from the fund as an explicit charge rather than it being factored into the annuity rate. So, whilst it fits with the regulatory position on commision, HMRC may take a different view. Not saying they will but if you treat fee and commission the same way, then at what point is one acceptable but not the other?

So you think the non-advising firm wouldn't have thought to check with HMRC whether the way they rebate commission is an authorised payment? It wouldn't be good publicity for them if they made unauthorised payments. If anyone is really worried they could always write to HMRC asking them if the firm is complying with tax rules.

dunstonh

So you think the non-advising firm wouldn't have thought to check with HMRC whether the way they rebate commission is an authorised payment?

I doubt they would have checked. More likely to assume.

It wouldn't be good publicity for them if they made unauthorised payments.

You should know by now that financial firms rarely think that far ahead.

If anyone is really worried they could always write to HMRC asking them if the firm is complying with tax rules.

A very good idea. You then get the go ahead to withdraw more from your fund with their consent or you get stopped before you do it.

zagfles

dunstonh wrote: »

I doubt they would have checked. More likely to assume.

You should know by now that financial firms rarely think that far ahead.

Ooh, how scary, better stick with an IFA, they never get anything wrong.

A very good idea. You then get the go ahead to withdraw more from your fund with their consent or you get stopped before you do it.

Or alternatively, use a broker who rebates the commission into your annuity rather that direct to you, if you're really worried about unauthorised payments.

dunstonh

Ooh, how scary, better stick with an IFA, they never get anything wrong.

Wow, nice attitude. Are you constipated?

bmm78

zagfles wrote: »

Which is what the OP wants, he was after non-advised. What makes some people think we all need financial advice shoving down our throats?

I think advised vs non-advised is a bit of a red herring, as to me the most important thing is to consider the full range of retirement options available.

It's not about shoving advice down people's throats - it's making sure that people are not missing out on something that could be better from them. The majority of non-advised companies only deal with annuities, and even those who are a bit more "cavalier" are restricted by what the insurance companies actually allow them to do on a non-advised basis.

Annuities are a more complex and risky product than often given credit for. They are irreversible and inflexible. Unless they are set up on an escalating basis, they provide no protection against the effects of inflation. Unless the right features are selected, they may not adequately provide for the annuitant's spouse or family on their death. If you die "too early", you may not get the full amount back, even with a guarantee period. If you die "too late", the spending power of the annuity will reduce significantly. It's a one-shot deal based on your health/lifestyle and annuity rates at a given point in time.

Annuities are still the right option for a lot of people, but for significant numbers there is another solution out there that better meets their needs. My concern is that non-advised desks don't provide access to potentially better alternatives, rather than they are "not giving advice". Ultimately most people don't really care whether the FCA define it as advised, non-advised, simplified advice or whatever. But people should definitely care about getting the right solution, which is not necessarily just the highest rate. Non-advised companies will only look after the latter.

The way it is set up at the moment, advice does not generally cost any more, should cover the full range of options, and offers a greater level of customer protection. Other than irrational prejudice, what is the incentive NOT to get advice?

zagfles wrote: »

If you really got "what you pay for" there'd be no need for MSE! You rarely "get what you pay for" in life. But it's a myth that allows companies to sell overpriced products to mugs (this applied to virtually every product or service).

I don't think that's really relevant to what we're talking about. The situation in the annuity market is that people are often paying the same, if not more for a non-advised service.

You seem to have an issue with financial advisers, which is your prerogative I guess. However, implying that people should pay the same for a non-advised service and get little protection doesn't seem to make sense. Surely getting a "good" adviser is a better solution?

zagfles wrote: »

You wouldn't be comfortable getting something allowed by HMRC? Why not?

It may well be allowed - I'm familiar with the rules set out by HMRC. However, I doubt that the rules were intended to generate significant cash lump sums for people outside of the usual PCLS. There is also the ambiguity of what is actually meant by "commercial rates" and "commercial profit".

If there is even the slightest element of doubt, I would be doing my own research and thinking carefully about it as I would have little comeback if it did go all Pete Tong. An unauthorised payment is an issue for the recipient to worry about, and not the firm who arranged it on a non-advised basis.

bmm78

zagfles wrote: »

If anyone is really worried they could always write to HMRC asking them if the firm is complying with tax rules.

I think this is a good idea. It's the person receiving the payment who has most to worry about, so it is definitely in their best interests to get this in writing. It makes it less vulnerable to any retrospective shifting of the goalposts.

zagfles

bmm78 wrote: »

I think advised vs non-advised is a bit of a red herring, as to me the most important thing is to consider the full range of retirement options available.

It's not about shoving advice down people's throats - it's making sure that people are not missing out on something that could be better from them. The majority of non-advised companies only deal with annuities, and even those who are a bit more "cavalier" are restricted by what the insurance companies actually allow them to do on a non-advised basis.

Annuities are a more complex and risky product than often given credit for. They are irreversible and inflexible. Unless they are set up on an escalating basis, they provide no protection against the effects of inflation. Unless the right features are selected, they may not adequately provide for the annuitant's spouse or family on their death. If you die "too early", you may not get the full amount back, even with a guarantee period. If you die "too late", the spending power of the annuity will reduce significantly. It's a one-shot deal based on your health/lifestyle and annuity rates at a given point in time.

But what makes you think the OP wasn't aware of all that? Those points are all fairly basic, I was aware of them all even though I have no intention of buying an annuity (not for a few decades anyway!).

Annuities are still the right option for a lot of people, but for significant numbers there is another solution out there that better meets their needs. My concern is that non-advised desks don't provide access to potentially better alternatives, rather than they are "not giving advice". Ultimately most people don't really care whether the FCA define it as advised, non-advised, simplified advice or whatever. But people should definitely care about getting the right solution, which is not necessarily just the highest rate. Non-advised companies will only look after the latter.

The latter was all the OP was after. He wanted a non-advised annuity quote.

The way it is set up at the moment, advice does not generally cost any more, should cover the full range of options, and offers a greater level of customer protection. Other than irrational prejudice, what is the incentive NOT to get advice?

As I said in my PP, it's worth seeing if an IFA can beat the quote. We keep being told IFAs can get better deals, so I'm sure IFAs would be happy to provide a quote on the basis of no fee if they can't beat the quote the OP has obtained from shopping around with annuity discount brokers.

I don't think that's really relevant to what we're talking about. The situation in the annuity market is that people are often paying the same, if not more for a non-advised service.

No harm comparing the two, is there? Shopping around is always a good idea for any major purchase, don't you think?

You seem to have an issue with financial advisers, which is your prerogative I guess.

No, I have a problem with the constant patronising attitude on this board that people are far too stupid to understand financial products, and when someone comes on to ask a question about a specific product, making it clear they don't want financial advice, they get told they need to see an IFA to make sure the product they said they said they wanted is actually the product they need.

However, implying that people should pay the same for a non-advised service and get little protection doesn't seem to make sense. Surely getting a "good" adviser is a better solution?

Where am I implying that? I've already said an IFA may get a better deal. I'm suggesting comparing quotes from annuity discount brokers with quotes from IFAs.

bmm78

zagfles wrote: »

But what makes you think the OP wasn't aware of all that? Those points are all fairly basic, I was aware of them all even though I have no intention of buying an annuity (not for a few decades anyway!).

The latter was all the OP was after. He wanted a non-advised annuity quote.

As I said in my PP, it's worth seeing if an IFA can beat the quote. We keep being told IFAs can get better deals, so I'm sure IFAs would be happy to provide a quote on the basis of no fee if they can't beat the quote the OP has obtained from shopping around with annuity discount brokers.

No harm comparing the two, is there? Shopping around is always a good idea for any major purchase, don't you think?

No, I have a problem with the constant patronising attitude on this board that people are far too stupid to understand financial products, and when someone comes on to ask a question about a specific product, making it clear they don't want financial advice, they get told they need to see an IFA to make sure the product they said they said they wanted is actually the product they need.

Where am I implying that? I've already said an IFA may get a better deal. I'm suggesting comparing quotes from annuity discount brokers with quotes from IFAs.

From a perspective where I see thousands of annuity purchases every year, the vast majority of people are not aware of all of these factors, at least not to the extent that they have a working knowledge of all types of products on the market and are able to link the two together. For example, it's one thing to be aware of inflation, and another to have an understanding of how dramatic an effect it will have on the annuity's purchasing power and how best to combat it.

Mis-buying is a far bigger issue in the annuity market than mis selling. Even when people are shopping around, they are often making poor choices about the type of product they go for through a lack of clear guidance. Although there are plenty of people more than capable of making sound decisions for themselves, there are many others who think simply getting the highest rate means getting the best deal. There is much more to it than that.

I have no idea of the OP's knowledge in the area. However, if me coming across as a patronising tool helps someone to make a more informed decision on something that is going to affect them for the rest of their life, I think that's a decent trade-off

Shopping around is a great idea. However, shopping around should involve looking at all the options available, which as I've stated non-advised companies can't do. Insurance companies do not permit some products to be sold on a non-advised basis, which means that people are unlikely to be aware of them unless they speak to an adviser. That isn't to say that people wouldn't understand them, but in a lot of cases they are unable to get access to the information in the first place. If you are just looking at the rate, you are instantly dismissing several other options that may actually produce a better overall income, better death benefits or better suit your needs.

A big problem with mis-buying from non-advised desks, as opposed to mis-selling by advisers, is that the customer has very little they can do if they want to complain down the line. Non-advised desks have their place, but anyone using them needs to go in with their eyes open and aware of their limitations.