Annuity Cartel?

deepoo

I am hunting around for an annuity. Saga gave a slightly better quote than L&G for a L&G annuity AND they are taking a £3.5k charge for doing it. L&G said that this is because they get a preferential rate that I can't have. This sounds like a cartel to me and should be illegal. We should all have access to the same special rates.

dzug1

deepoo wrote: »

. We should all have access to the same special rates.

You probably would have access to those rates if you took out thousands of annuities a year


So no cartel

deepoo

Yes, but £3.5k for a bit of form filling - no advise or anything !!!

xylophone

I am hunting around for an annuity.

An IFA might help? http://www.unbiased.co.uk/

Are you sure that you want to go down the annuity route?
http://www.hmrc.gov.uk/pensionschemes/pensionflexibility.htm

dunstonh

L&G said that this is because they get a preferential rate that I can't have. This sounds like a cartel to me and should be illegal.

A cartel is where prices are the same. Tescos sell beans at a different price to Morrisons, Waitrose, Asda etc. Are you saying that should be illegal?

We should all have access to the same special rates.

Economies of scale exists in all retail markets. For annuities, IFAs get the best rates. So, they are probably better than SAGA.

Yes, but £3.5k for a bit of form filling - no advise or anything !!!

Such is the nature of a commission based service. Use an IFA who will do it on fee basis.

deepoo

Thanks for those links. I will try some IFA to see if they can do better rates. I don't mind paying for their time if they get a better rate for me, but not a percentage of my pension pot.

I have savings so don't need to draw down money. I know the rates are not good at the moment but who can say when they will go up? I'm thinking that it is better to get and annuity now rather than wait for interest rates to go up in a few years. If they do go up to say 3%, what rate of return might I get? (take an example of a 60 year old in good health - currently getting around 5.3%)

dunstonh

I have savings so don't need to draw down money.

So why are you?

I know the rates are not good at the moment but who can say when they will go up?

They have been slowly zig zagging up but they will start to improve when interest rates start to rise or markets believe they will rise.

I'm thinking that it is better to get and annuity now rather than wait for interest rates to go up in a few years.

With the budget changes, that point of view is largely obsolete now. Also, remember that your pension pot will be higher and your annuity rate would be higher due to age (and possibly health).

Jack_Griffin

The annuity rates more or less follow 15year gilt rates..

Charts from https://www.sharingpensions.co.uk

Annuity Rates


15 yr Gilts

Eric_the_half_a_bee

These charts, and a lot of discussion around annuities, focus on rates for level annuities. These strike me as very risky - a few years of 10% inflation could lead to many years of an unexpectedly low income.

Does anybody know of similar charts for index linked annuities?

Badmovie

dunstonh wrote: »

Economies of scale exists in all retail markets. For annuities, IFAs get the best rates. So, they are probably better than SAGA.

Slightly contradictory. If we are looking at large scale intermediaries such as non-advised annuity companies, then they are likely to get better rates from a provider than lets say an FI that submits 3 annuity cases a year.

You need to consider whether an annuity and not another product, wholy meets your needs towards part or all of your lifetime income.

If your not sure then yes definatley seek a whole of market FI's advice.

dunstonh

Slightly contradictory. If we are looking at large scale intermediaries such as non-advised annuity companies, then they are likely to get better rates from a provider than lets say an FI that submits 3 annuity cases a year.

Most advisers are networked or use compliance company services that give them bulk buying powers. Plus, IFAs still dominate overall distribution in this area. Over 70%. This is one of the reasons why IFAs can still beat the online services.