How to reduce charges on buying AVC annuity

OldGit_2

I am 61 and retired and have a company pension scheme that pays £19,200 gross. I have an AVC fund with Aviva worth £37,000, which I would like to start drawing on this year to give me some extra income/capital before I get my state pension in 2017.

I have been shopping around for rates and speaking to several FAs and finance companies that offer to get you a good rate. The trouble is they all seem to charge a hefty fee (£500 - £1,200) for finding you a suitable product and doing the paper-work. Aviva have told me that there is no charge for buying one of their annuities as my fund is already with them, but one FA has said that they will probably 'factor in' a charge by offering a lower rate.

Is there a way to reduce such charges, and also get a good deal?

dunstonh

The trouble is they all seem to charge a hefty fee (£500 - £1,200) for finding you a suitable product and doing the paper-work.

Although there is no longer any commission and with the fee coming from the pension, the key thing is whether they come in with a better rate or not.

Aviva have told me that there is no charge for buying one of their annuities as my fund is already with them, but one FA has said that they will probably 'factor in' a charge by offering a lower rate.

That is correct. Non-advised still factor in commission and typically in-house give lower rates.

Is there a way to reduce such charges, and also get a good deal?

£500-£1500 is a fair price range for an IFA. Make sure it is an IFA. Not an FA.

jem16

OldGit wrote: »

I have been shopping around for rates and speaking to several FAs and finance companies that offer to get you a good rate. The trouble is they all seem to charge a hefty fee (£500 - £1,200) for finding you a suitable product and doing the paper-work.

The rates you have been quoted sound fair, especially the £500 quote.

Make sure it's an IFA that you see.

Aviva have told me that there is no charge for buying one of their annuities as my fund is already with them, but one FA has said that they will probably 'factor in' a charge by offering a lower rate.

That's absolutely true. It is very unlikely that your provider will offer the best deal unless there were guaranteed rates built in.

Is there a way to reduce such charges, and also get a good deal?

The best deal is likely to be through an IFA. They will be able to get you a higher rate even with the cost of advice.

kidmugsy

Is it one of those AVCs where you're allowed to transfer it to a SIPP? If so, I'd be tempted to move it to a SIPP, buy an annuity worth £800p.a. then register the remaining money for flexible withdrawal and take it all out to bridge the gap until S.P. begins.