Annuities - Open Market Option

Telegraph_Sam

The generic advice you read in any article on taking out an annuity is to exercise the open market option to get the best deal. At which point the advice dries up as far as how to go about it is concerned.

Obviously you can look up and approach an (independent) financial advisor to do the legwork - and pay the appropriate fees and charges which to some extent nullify the advantages of what the research uncovers. You would think that in these days of internet search engines it would be commonplace, at least as a first step, to do some DIY search, either as a basis for taking one's own decision or, if the circumstances (health etc) warrant it, as a basis with which to approach one or more advisors.

I believe that there are such search engines and that many are designed for use by professionals. Some may (for all I know) be more unbiased than others and/or impose hidden charges. Are there any that can be recommended for use by Joe Soaps approaching retirement with internet access?

Jack_Griffin

As a first step try this calculator to obtain an estimate, it will give you some numbers to take to an IFA if you chose to use one.

http://pluto.moneyadviceservice.org.uk/annuities

If they are any good surely they can confidently assert they will deliver better deal for you based on the same assumptions (after deducting their fee).

I wonder what are the odds of getting a promise like that in writing?

bmm78

The Money Advice Service figures are not binding, so should be treated with caution, particularly where a lot of manual information is put in.

They are also only a snapshot of rates on that day from a panel and not from the whole of market. Rates change on a regular basis (up and down).

There has been a lot of negative coverage of the annuity market recently fuelled by the FSCP report, but there was no criticism of the ability of whole of market intermediaries to get the best rate.

If you speak to either an IFA or a Whole of Market non-advised broker, you should be confident that you are getting a very competitive rate.

The bigger issues are getting the right type of annuity, and whether an annuity rate is the right product in the first place.

SomeUser

Go to a broker, or use a whole of market online brokerage service. TOMAS is one, there are others too. Won't let me post a link, but try tomasonline .co .uk

sandsy

Telegraph_Sam wrote: »

and pay the appropriate fees and charges which to some extent nullify the advantages of what the research uncovers.

Generally not the case.


If you purchase from a website which markets direct to the public, the annuity rate you get will usually have charges built into it to pay for commission to the firm owning the website. Those rates will generally vary from around 1.5%-4%. You have to make all the decisions about the shape of the annuity (spouse's benefits, guarantees, payment options etc) with no help as well as be sure you're not giving up valuable guarantees built into your pension first or.


If you purchase from an IFA, you pay the charges you have agreed to but you are actually getting something worthwhile for that - advice. They do all legwork for you and provide you with a personal recommendation of a specific product from a specific company which is suitable for you, given your specific circumstances. this will include assessing whether or not an annuity on its own is the right retirement income option, assessing your eligibility for enhanced terms etc. In some cases, they may be able to negotiate with a product provider for better terms. And you even have some comeback if they give unsuitable advice which you act on.

Telegraph_Sam

Thanks I'll check out tomasonline as a first step.

My thoughts were not so much either / or, rather a combination. On the one hand there are IFA's and IFA's and it is caveat emptor as far as the balance between service / expertise on the one hand and costs and charges on the other is concerned. If you do some preliminary online research first then (to me) you should be in a much better position to talk sensibly to a broker subsequently if domestic circumstances such as you mention dictate. Approaching a broker / IFA from a position of ignorance is not an approach I would feel happy with in these days of online "transparency".

But this does depend on getting hold of a proper search facility which was my opening point and which I hope Tomas can fulfil. Any other consumer oriented ones to recommend? I heard somewhere that Which? was having thoughts in this direction but I have not investigated further (yet).

zagfles

See these threads for recent discussions
https://forums.moneysavingexpert.com/discussion/4856652

https://forums.moneysavingexpert.com/discussion/4846538

mania112

The benefits of an IFA are:

1. They will advise you which retirement product is most suitable for you (Income Drawdown V Annuity and the many variations of both).

2. They will most likely find you a higher income (in the case of an Annuity) than you could find yourself.

3. They will carry out the application process for you - leaving you to just sign on the dotted line.

4. Offer assurance that the transaction is insured in (the unlikely event of) a mis-sale. Clearly, if you do your own thing, you've only yourself to blame.

- So the point i'm making is, it's not just about the best rate. It's knowing what rate you're looking for. What's the best shape of annuity for you? do you NEED the income NOW, or can you defer the income? Do you just need the cash sum?

Telegraph_Sam

I don't think what you say is agin my own point. If I can approach an (unknown possibly) IFA armed with my own preliminary online research such as from plutomoney (yet to investigate this one), I have a benchmark against which to judge his recommendations. If I don't, and I happen to be unlucky in my choice of IFA, then I'm up the creek. Conversely if the IFA can come up with a genuinely better deal, charges included, then I have the satisfaction of knowing that this was the correct course - or of course the option of walking away if I'm not satisfied.

What is a chill-out coach??

bigadaj

This is the one area where it is normally a no brainer, though I hate that term, to use an ifa. Apart from the fact that most people would probably be better off with drawdown in many circumstances, then the ifa fee should be covered by the provider unless the pot is small.

If you find that you think what you have been given is sub optimal then you can always complain, first to the ifa and then to the regulator. You will probably have an initial offer from your pension provider anyway so are unlikely to lose out given that the cost of advice comes out of the product.

You can obviously challenge an ifa to beat a quote but it's up to them to decide whether to proceed on that basis and most probably wouldn't unless business was very slow

zagfles

bigadaj wrote: »

You can obviously challenge an ifa to beat a quote but it's up to them to decide whether to proceed on that basis and most probably wouldn't unless business was very slow

Why not? We keep being told IFAs will get a better deal than DIY, so any IFA who isn't confident he can beat a DIY quote probably isn't worth dealing with