Buy an annuity for £100 @ Cavendish

Froggitt

Have been refunding commissions on ISAs for a while now.....about to disrupt the pension market now with £100 flat rate annuities.


https://annuities.cavendishonline.co.uk/page/details


Potential to save thousands.......you need to know exactly whats right for your circumstances as I doubt theres any advice included.

bmm78

No advice, and most importantly not Whole of Market.

There's no point saving a few hundred quid on commission if you're losing the same amount in income every year by getting an inferior annuity rate.

Ignore the smoke and mirrors; if you're not using a whole of market service you risk being much worse off in the long run.

dunstonh

I doubt there is any haggling either as that is a manual process. However, for below say £25k pots, it would have to be a good option.

bmm78

Ran some sample quotes off on a fund size of £50,000. Received around £600 upfront, but lost out on around £300 per year before haggling/full underwriting (so probably more by the end of the day).

A lot depends on what enhancement you can get on the standard rates. As upto 70% of people could qualify for an enhancement, it's vital to go to every single annuity provider as they all underwrite differently. The difference between the top enhanced provider and the top standard provider can be massive.

Also need to consider the the risk of accepting cash rebates. It is within HMRC rules to do so, and does not appear to be taxable, but all the risk of any retrospective action from HMRC is with the individual receiving the rebate, not the provider or intermediary.

Cavendish

bmm78 wrote: »

Ran some sample quotes off on a fund size of £50,000. Received around £600 upfront, but lost out on around £300 per year before haggling/full underwriting (so probably more by the end of the day).

A lot depends on what enhancement you can get on the standard rates. As upto 70% of people could qualify for an enhancement, it's vital to go to every single annuity provider as they all underwrite differently. The difference between the top enhanced provider and the top standard provider can be massive.

Also need to consider the the risk of accepting cash rebates. It is within HMRC rules to do so, and does not appear to be taxable, but all the risk of any retrospective action from HMRC is with the individual receiving the rebate, not the provider or intermediary.

Official Response from Cavendish Online.


We provide both Standard and Enhanced annuities from 4 providers at present. Cavendish Online will be adding a number of providers to the panel within the coming weeks and months.


Cavendish Online charges £100 and the rest of the commission is paid back to the client. Cavendish Online has confirmation from HMRC that the commission will be paid without liability to tax and does not trigger an Unauthorised Payment.


Cavendish Online recognises that not everybody will be comfortable in dealing with an internet based process and making their own decisions. Purchasing an annuity is an important decision and there will also be occasions when alternatives to an annuity should be considered. We have therefore established a service via www.compareannuities.eu that will be happy to provide a guided service or a full advice service. Full terms and conditions will be provided by them at the point of contact.

bmm78

Cavendish wrote: »

Official Response from Cavendish Online.


We provide both Standard and Enhanced annuities from 4 providers at present. Cavendish Online will be adding a number of providers to the panel within the coming weeks and months.

In light of the findings of the FCA report, anything other than a truly Whole of Market service has to be viewed with extreme caution. If you don't get the highest rate available, any short-term gain from the rebate can easily be outweighed in the medium term and beyond by getting a lower annuity income.

4 providers is a very restricted sample of the annuity market, and there are some significant enhanced annuity providers who are not quoted.

Personally I think the wording on the website could be clearer about this restriction:

"Cavendish Online’s system is very price competitive and we have made arrangements with the key providers in the marketplace to achieve a high quality instant online quotation system. Some companies do not wish to operate in this “open market” and transparent process and choose not to be on our quotation system. In our experience these tend to offer poorer value than the major players in the industry. Our system uses all of the principle players in the annuity market who would be considered “household” names and recognisable by the vast majority of customers."

Just Retirement and Partnership may not be household names due to the area of the market they focus in, but it is very questionable to suggest that they offer "poorer value" than L&G or Aviva, or that they are not key players in the (enhanced) annuity market.

A true "open market" considers all providers; that is the gold standard the industry should be working towards.

Cavendish wrote: »

Cavendish Online charges £100 and the rest of the commission is paid back to the client. Cavendish Online has confirmation from HMRC that the commission will be paid without liability to tax and does not trigger an Unauthorised Payment.

It's good that confirmation has been obtained directly from HMRC regarding their current stance. Did they shed any light on how they define the term "commercial profit" in RPSM09106040? This has always been the part that has concerned me, as it seems to be something out of the control of the recipient.

Cavendish wrote: »

Cavendish Online recognises that not everybody will be comfortable in dealing with an internet based process and making their own decisions. Purchasing an annuity is an important decision and there will also be occasions when alternatives to an annuity should be considered. We have therefore established a service via www.compareannuities.eu that will be happy to provide a guided service or a full advice service. Full terms and conditions will be provided by them at the point of contact.

I think it's always best practice for a non-advised annuity service to have an advised referral option, whether that is in-house or via another intermediary.

dunstonh

Cavendish Online charges £100 and the rest of the commission is paid back to the client. Cavendish Online has confirmation from HMRC that the commission will be paid without liability to tax and does not trigger an Unauthorised Payment.

Rather than rebate the commission as cash in hand, why not just take £100 as the commission amount. All providers all that. That way the annuity rate will be higher and your admin costs will be lower as you wont have to faff about with rebating.

We have therefore established a service via https://www.compareannuities.eu that will be happy to provide a guided service or a full advice service. Full terms and conditions will be provided by them at the point of contact.

Their website says guided service only. quote: "Compare Annuities is an impartial guidance only service".

They say for advised options they refer onto another company. Thats a lot of hoops to jump through to go from DIY to guided to advised. I would also suggest it cant be impartial if it only considers lifetime/enhanced annuities and not the other options. However, given the FCA found errors on every annuity site it checked, it may be their wording needs tweaking. Or I may be looking at it from an overly compliant point of view.

It's good that confirmation has been obtained directly from HMRC regarding their current stance. Did they shed any light on how they define the term "commercial profit" in RPSM09106040? This has always been the part that has concerned me, as it seems to be something out of the control of the recipient.

Our compliance company says still not to do it as commission and adviser fee nowadays often equates to the same thing. i.e. a £1000 fee or £1000 commission means £1000 is deducted out of the pot explicitly. Where that is the case, the HMRC position may change as clearly it is eroding the fund to provide a tax free payment. Whereas older contracts where commission was factored into over a period and not an explicit charge are more likely to be accepted rebates by HMRC. So, they have said to not take chances by rebating and they highlighted the point I mentioned above that any commission taken and rebated lowers the annuity rate.

marathonic

I see they recommend seeking advice on funds in excess of £100,000.

I done a test quote on a single 55 year old, non-smoking, casual drinker with a fund, after tax free cash of £120,000.

It has no guarantee, 3% escalation and no spouses pension.

The result is £3,828.72 per year and a £1,460 rebate.

That works out at a 3.23% rate. I imagine brokers would be able to beat this but I'll not be looking at it for another 25 years - just interested to know for my pension planning.