How to find a good annuity

Debutante

DavidLaGuardia wrote: »

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If you use an IFA the cost of this commission is taken out and the cost of all or most of the agree IFA fee can be added in and paid by the provider. This is better than a separate fee as it is coming out of a taxable contract.

So if I understand correctly. The way the providers have 'got around' the inability to pay commission to an independent IFA is to in effect add the cost of what would have been the commission to the value of the annuity thereby enabling the client to have a larger return so they could afford to pay the IFA 's fees out of this enhanced value (if that makes sense )

SallyG

Not sure about why the pension/annuity providers are still allowed to charge direct sales "unadvised"customers for the commission they can't now pay to IFAs - I can see why they will do that if it's not banned.......
I'm in income drawdown - arrived via Direct Sales route from a Stakeholder pension so as to release tax free cash without buying an irreversible annuity -
I believed I was saving cash by going commando/unadvised but according to this forum I was paying the commission anyway so I might as well have taken advice from an IFA and had more chance of compensation if things go wrong.
Not sure how or whether that deduction for "commission" will appear on the bill from the provider.

bigadaj

SallyG wrote: »

Not sure about why the pension/annuity providers are still allowed to charge direct sales "unadvised"customers for the commission they can't now pay to IFAs - I can see why they will do that if it's not banned.......
I'm in income drawdown - arrived via Direct Sales route from a Stakeholder pension so as to release tax free cash without buying an irreversible annuity -
I believed I was saving cash by going commando/unadvised but according to this forum I was paying the commission anyway so I might as well have taken advice from an IFA and had more chance of compensation if things go wrong.
Not sure how or whether that deduction for "commission" will appear on the bill from the provider.

Yes I agree but that's the way it is apparently. No doubt better to go via an ifa with the only exception being a small pot with no heath problems etc, as in that case the ifa fees can exceed the commission payment so you could marginally be worse off, though may still be better off than simply taking the initial offer of the insurer.

Debutante

SallyG wrote: »

...
I believed I was saving cash by going commando/unadvised but according to this forum I was paying the commission anyway so I might as well have taken advice from an IFA and had more chance of compensation if things go wrong.
...

I am looking at this with 'fresh eyes' and ignorance.
It appears to me there has been an attempt to make things fairer and more transparent for the client buying the annuity/product but it strikes me that it is grossly unfair not to rebate the commission to the client if they approach directly. I understand that if there are large sums of cash at stake then the consumer/client should be steered to take professional advice but if the providers had a duty of care to always offer the best deal then clients dealing with small amounts of money like me would be better off.

dunstonh

It appears to me there has been an attempt to make things fairer and more transparent for the client buying the annuity/product but it strikes me that it is grossly unfair not to rebate the commission to the client if they approach directly.

If the retailer cannot earn a commission, then where do they make their money?

I understand that if there are large sums of cash at stake then the consumer/client should be steered to take professional advice but if the providers had a duty of care to always offer the best deal then clients dealing with small amounts of money like me would be better off.

The providers have no duty of care to always offer the best deal. That is impossible to achieve. Annuity pricing is affected by the retailer profit margin (the commission in this case). Economies of scale (the more a distribution channel sells, the better the terms it can negotiate. IFAs dominate pensions with over 70% of the market). Then you have deal availability. IFAs have to be whole of market. Any service claiming to be independent has to do that. However, most of these online sites are restricted non-advice. Most of the providers are single company or limited panel restricted. Then you have quality of data. The better the data sourcing is, the better the rate will be. At least one insurer refuses to do comparison sites as the underwriting data has been patchy, inconsistent and frequently wrong resulting in inaccurate sales and as they didnt have a large volume anyway, they pulled out of that market

You can get the same provider through different "retailers" with each being a different annuity rate. It all comes down to the above.

Debutante

Thank you Dunstonh
I understand the advisers have to make a profit but the number of people with such small funds as me and who also want to go it alone must be quite small. If I had significantly more than the 20k I have then without doubt I would get advice but I feel if I go direct I should get the commission

I can understand from your explanation why comparison sites would not be appropriate as there are just too many variables.

Thanks again

Debutante

For the benefit of anyone who might find this thread, I would like to report that it is quite easy to diy if you have a small pension pot. I have had a variety of quotes for an enhanced annuity and there was a wide variation. It took an afternoon to set in progress a chain of events which has produced more than 40 different quotes which cover every company I have ever heard of. The best one was nearly 40% higher than the company who holds my fund. I am fairly confident that an ifa could not have significantly beaten this. If there was a fee in addition to the commission paid by the annuity provider then I am sure I would be worse off if I had gone down that route.

jem16

Debutante wrote: »

The best one was nearly 40% higher than the company who holds my fund. I am fairly confident that an ifa could not have significantly beaten this.

For the benefit of others, could you tell us what annuity rate you got?

If there was a fee in addition to the commission paid by the annuity provider then I am sure I would be worse off if I had gone down that route.

There wouldn't be a fee in addition to the commission. The commission would be removed and the fee taken in its place.

bigadaj

jem16 wrote: »

There wouldn't be a fee in addition to the commission. The commission would be removed and the fee taken in its place.

Yes, but the net effect to the customer is still an additional cost which on a small pot might well outweigh any benefit the ifa could generate.

I'd also be interested to hear the figures achieved though.

jem16

bigadaj wrote: »

Yes, but the net effect to the customer is still an additional cost which on a small pot might well outweigh any benefit the ifa could generate.

Wasn't suggesting otherwise. I was just clarifying that it's not commission PLUS fee.