IFA fee for arranging an enhanced annuity

gterr

Just looking for a bit of info, since I've never used an IFA before.


I may, in a few years' time, look into buying an enhanced annuity, assuming these are available as Purchased Life Annuities. It happens that I have a chronic condition which, statistically, reduces life expectancy by an average of 20 years. I would use an IFA for this, though the rest of my investments are DIY.


At what point in the process does a fee become payable? For instance, if the IFA was not able to find me an annuity rate that I thought was worthwhile would I still pay for his/her time (this seems entirely reasonable). Or would the fee be payable only if the annuity was actually arranged?


The other thing is that I have no intention of dying 20 years earlier than the average, nor would my GP be able to predict things one way or another, though she would be able to confirm my diagnosis. It's a psychiatric condition and there is nothing physical to measure. It remains the case that my diagnosis does statistically carry with it a reduced life expectancy. What do the insurance companies rely on in these cases - actuarial tables, presumably?


Thanks for your time.

dunstonh

For instance, if the IFA was not able to find me an annuity rate that I thought was worthwhile would I still pay for his/her time (this seems entirely reasonable). Or would the fee be payable only if the annuity was actually arranged?

You would normally pay for work done so far.

What do the insurance companies rely on in these cases - actuarial tables, presumably?

Effectively, yes.

M.R.W.

gterr wrote: »

At what point in the process does a fee become payable? For instance, if the IFA was not able to find me an annuity rate that I thought was worthwhile would I still pay for his/her time (this seems entirely reasonable). Or would the fee be payable only if the annuity was actually arranged?

Hi, I suspect most IFAs would prefer to agree a fixed fee for research and a report/recommendation in this case. If you do agree a fixed fee for this then make sure you also agree in advance what happens if you want to proceed with their recommendation, i.e. whether there will be any additional costs for arranging the annuity?

bmm78

gterr wrote: »

At what point in the process does a fee become payable? For instance, if the IFA was not able to find me an annuity rate that I thought was worthwhile would I still pay for his/her time (this seems entirely reasonable). Or would the fee be payable only if the annuity was actually arranged?

FCA rules are not prescriptive in how firms choose to charge. It could be a fixed fee or a percentage, payable for each piece of work undertaken or in one lump at the end, taken from the product or by a cheque to the adviser, etc. The key elements are that both parties agree and everything is transparent.

Always check the firm's Terms of Business document(s), as these should clearly set out what the charges are, when they are paid, how you can pay them, and what you are getting in return.

The crucial point is that you don't have to pay anything that you don't agree to.

The FCA are far more concerned with charges being clear than they are with how much the charges are.

gterr wrote: »

The other thing is that I have no intention of dying 20 years earlier than the average, nor would my GP be able to predict things one way or another, though she would be able to confirm my diagnosis. It's a psychiatric condition and there is nothing physical to measure. It remains the case that my diagnosis does statistically carry with it a reduced life expectancy. What do the insurance companies rely on in these cases - actuarial tables, presumably?

Underwriting varies from insurer to insurer, and is constantly evolving. The enhanced market is actually very competitive, with insurers looking at more and more sophisticated ways to assess mortality and offer improved rates based on this. Ultimately though it's upto the insurer as to whether a condition qualifies for an enhancement, and what that enhancement will be.

From what I've come across, insurance companies will want to see some tangible evidence of the condition (medication for example). It's difficult to talk generically though; all you can do is make sure to disclose any and all information that may be relevant, and see what rates come back as a result of this.

gterr

bmm78 wrote: »

Underwriting varies from insurer to insurer, and is constantly evolving. The enhanced market is actually very competitive, with insurers looking at more and more sophisticated ways to assess mortality and offer improved rates based on this. Ultimately though it's upto the insurer as to whether a condition qualifies for an enhancement, and what that enhancement will be.

From what I've come across, insurance companies will want to see some tangible evidence of the condition (medication for example). It's difficult to talk generically though; all you can do is make sure to disclose any and all information that may be relevant, and see what rates come back as a result of this.

Thanks. That's very helpful. I have appropriate medication etc. and routine consultants' reports. So, it will be interesting to see what comes back from the IFA's research.

Proxy

The Enhanced annuity market may be competitive, but significantly less so in Purchased Life Annuities. In comparison, the market size is much smaller and many companies do not compete as actively as in pension annuities.

SallyG

Could I ask about how/whether enhanced annuity providers take into account how easily/well managed a health condition is when they assess how long someone will live. I've now got a list of 5 diagnosed ailments/conditions that are treated by medication - will that fact rule out annuity enhancement?

dunstonh

SallyG wrote: »

Could I ask about how/whether enhanced annuity providers take into account how easily/well managed a health condition is when they assess how long someone will live. I've now got a list of 5 diagnosed ailments/conditions that are treated by medication - will that fact rule out annuity enhancement?

The medications and the levels of medication give an indication of severity. A number of managed conditions (blood pressure or cholesterol for example) will see the readings and the medication levels work in conjunction with each other.

bmm78

Proxy wrote: »

The Enhanced annuity market may be competitive, but significantly less so in Purchased Life Annuities. In comparison, the market size is much smaller and many companies do not compete as actively as in pension annuities.

Sorry, didn't pick up in the pla part. Agreed, not as competitive.

bigadaj

Are the any checks for things like smoking, I've heard things like oxygen blood tests?

I'm registered as a smoker, for example, with my gp but rarely smoke, the concept of an occasional smoker doesn't seem to register.

Proxy

bigadaj wrote: »

Are the any checks for things like smoking, I've heard things like oxygen blood tests?

I'm registered as a smoker, for example, with my gp but rarely smoke, the concept of an occasional smoker doesn't seem to register.

You may be randomly selected for a cotanine test by the insurer.