Non advice annuity purchase

glynm15

Hi all,

Wasn't sure what to put as title - so ill try and explain.

I'm helping my father in law sort his pension out. Previously helped my own father do his through an IFA so picked up limited knowledge.

FIL is 56 and has recently stopped work for a number of reasons (he will be looking for a new part time job in the new year) and decided to see if he can take the benefits of his pension.

I have explained pros and cons of annuities / taking it now / leaving it etc.

His fund stands at £63000, he has no debts, owns his own home and is in good health, so will be looking at a standard annuity.

Have requested a quote from provider (Legal and General through Zurich) and awaiting on this.

My main question is whilst waiting - I've been looking at comparison sites etc for well..... A Comparison / best quote - is it likely these will provide the best quote or will an IFA beat these. Anyone explain fees etc for both

And if I'm to use a comparison site can anyone point to a good one if allowed.

Any advice / opinions welcomed.

Thanks in advance.

xylophone

https://www.moneyadviceservice.org.uk/en/articles/retirement

You would consider the open market option?

You could try an IFA again?

jamesd

An IFA is likely to do the best job and get a higher income. Do the best you can and ask an IFA if they can beat it after allowing for the effect of their costs. Comparison sites are a good starting point but not a good place to finish the search.

You wrote that he's in good health. But does that mean he has nothing physically that could affect his life expectancy, like smoking or being overweight? Anything that reduces life expectancy could make an enhanced annuity a better deal than a standard one, paying out sometimes substantially more. This is the area where a good local IFA could do a very beneficial job, including perhaps negotiating for a higher rate.

bmm78

IFAs (and other advisers) are no longer allowed to take commission payments, and must agree a charge with you. For annuities, the most common method is to deduct the charge from the pension fund (ie rather than writing a cheque).

Non-advised brokers can still receive commission payments, and the vast majority do. Although commission is built into the annuity rate, the result is essentially the same as a charge. Don't listen to anyone who suggests commission is "free" or without cost.

dunstonh

Have requested a quote from provider (Legal and General through Zurich) and awaiting on this.

My main question is whilst waiting - I've been looking at comparison sites etc for well..... A Comparison / best quote - is it likely these will provide the best quote or will an IFA beat these. Anyone explain fees etc for both

I have a Zurich (ex Dunbar) annuity case on the go at the moment. Just waiting for the providers to come back with their initial quotes before I go into the haggle stage. However, so far, the Zurich quotes and L&G quotes supplied by Zurich are the lowest. On this one, I will also be beating comparison sites.

On your father's one, the comparison sites wont do any haggling and the commission payable will be largely similar to the adviser fee (on my one, the commission would be double the adviser fee).

If he only qualifies for standard terms, then the differences wont be great but there isnt really any reason not to use an IFA or restricted adviser (with no restriction on annuities)

kidmugsy

He's really set on an annuity, is he, rather than income withdrawal? If so, have you considered an investment-linked annuity? I ask because I'd have been terrified of taking a level annuity at 56. It's effectively a bet on there being no inflation spikes in the next thirty years.

atush

This is one ionstance that using an IFA makes the most sense, as there is a fee (used to be commission) involved in annuity purchace- if you use advice or not. So might as well get advice, and get a higher pension as a result (as I have never heard of one who could not beat rates give to consumers).

Having said this, at 56, he should NOT take an annuity in his case as he is too young. With a PT job does he need income? Or would the 25% TFLS do for him now, and leave the rest in drawdown ro grow (w/o taking an income?)

glynm15

Thanks for the replies.

Just trying to explain to FIL how it all works in plain English.

Explain re drawdown and reply was what if it A doesn't invest well (no idea of how well or wont grow) and B what if annuity rates are still low - he has missed out on x amount of annuity payments in those years.

Re comparison sites v IFA - without sounding dumb is it likely that comparison site is taking x amount in commission v a flat fee of an IFA with the CSite working out a the highest And the IFA will hopefully be able to get more.

If that is the case - is it ok / done thing to approach IFA say this is my best quote - beat it and the business is yours.

Last question which I think I know the answer to - is will the annuity providers haggle with me!

Again any advice apprecited.

Regards
G

mania112

glynm15 wrote: »

Explain re drawdown and reply was what if it A doesn't invest well (no idea of how well or wont grow) and B what if annuity rates are still low - he has missed out on x amount of annuity payments in those years.

While in Drawdown you can take an income, this is an ALTERNATIVE to an Annuity payment, so you don't lose the ability to receive a payment. Plus, in the future we'd hope Annuity Rates to improve and of course your father will be x years older and maybe now in ill health.

On the flipside of course Annuity rates might not be any better and the fund value in drawdown could be lower.

It's a really complex decision and identifies another benefit of talking to an IFA.

FYI: If the whole fund is used to provide an income in a Drawdown product (ie no tax free cash on day one) the maximum income is currently £3,704pa - and I know without asking that your Annuity quotes won't be anywhere near this.

(If taken 25% tax free cash the remaining fund will pay £2,778pa)

This income is guaranteed for 3 years, then reviewed. At any time an Annuity can be purchased.

glynm15 wrote: »

Re comparison sites v IFA - without sounding dumb is it likely that comparison site is taking x amount in commission v a flat fee of an IFA with the CSite working out a the highest And the IFA will hopefully be able to get more.

If that is the case - is it ok / done thing to approach IFA say this is my best quote - beat it and the business is yours.

Some IFA's will accept that challenge and others won't - depending on their business model.

glynm15 wrote: »

Last question which I think I know the answer to - is will the annuity providers haggle with me!

I don't think so, but to be honest I couldn't be certain.

The trouble (for you) is that you're not buying 10-20 Annuities a month so the provider might not be willing to barter with you as much as an IFA with a history of business.

dunstonh

Last question which I think I know the answer to - is will the annuity providers haggle with me!

Not likely. Annuity pricing has a lot to do with economies of scale. You are just one individual. intermediaries dominate the distribution (over 70%). Hence why intermediates get the best rates.

atush

IFAs CAN haggle, which is why they get better rates (that and there is a very alrge segment of the annuity market that only deals with IFAs so you wont have access to this)