Annuity commission

dunstonh

I have to admit that in the days of getting car insurance via online comparison sites I think paying 1% plus to arrange an annuity is extortionate.

Yet a typical savings account has a greater margin. As does most retail products you buy.

he one person I know that consulted an annuity paid £500 an hour for the privilege... would there be enough actuaries to provide quotes for each person want an annuity....

And probably ended up with a better annuity rate because of it.

doughnutmachine

dunstonh wrote: »

Yet a typical savings account has a greater margin. As does most retail products you buy.

but 1% on £500k is £5k..... I just don't see what work the IFA does to justify that fee......

jem16

doughnutmachine wrote: »

but 1% on £500k is £5k..... I just don't see what work the IFA does to justify that fee......

That's the good thing with an explicit fee as you can see exactly what the IFA would be charging. If you are unlucky enough to find a greedy adviser charging £5k then you go and find another. Most would have a ceiling of £1500-£2000 with full and proper advice.

Go DIY and you would probably pay that £5k with no advice and no consumer protection.

doughnutmachine

jem16 wrote: »

That's the good thing with an explicit fee as you can see exactly what the IFA would be charging. If you are unlucky enough to find a greedy adviser charging £5k then you go and find another. Most would have a ceiling of £1500-£2000 with full and proper advice.

Go DIY and you would probably pay that £5k with no advice and no consumer protection.

thanks, £1500 wouldn't be too bad to set up an annuity.

all this talk of 1% to 4% seems a lot to me

jem16

doughnutmachine wrote: »

all this talk of 1% to 4% seems a lot to me

No point in talking about a percentage without an actual amount to reconcile it with. On a £50k pot, 1% is a good deal.

bmm78

I think it's easy to get fixated with the (perceived) amount of work that goes into providing a service, compared with the actual value the customer gains from it.

A "good" adviser could pay for themselves several times over with their expertise, while a "bad" adviser with the same amount of work could make a complete mess of things and actually end up costing the customer.

It's important to shop around for a broker/adviser, but shopping around should be based on knowledge, experience and expertise as well as how much they charge.

dunstonh

but 1% on £500k is £5k..... I just don't see what work the IFA does to justify that fee......

A £500k pension fund carries a very high liability risk to the adviser. You are looking at a large range of options to be considered and advised on. However, 1% with no cap is more in line with the non-advised cases that you get via the internet. An IFA would be expected to have a cap on that figure.

You also need to consider that the IFA will probably have better terms than going direct. They will frequently be able to haggle the figure up further as well. The end result is what matters.

thanks, £1500 wouldn't be too bad to set up an annuity.

all this talk of 1% to 4% seems a lot to me

£1500 on a £20k pot is 7.5%. Yet you say 4% is a lot. Percentages need to be in context. As it happens £1500 is a very typical figure. Indeed, perhaps I should put my fee up if you think £1500 is reasonable as I am obviously not charging enough.