IFA charges for annuity

ivavoucher

HI

The pension is: Premier EPP.

I want to take max tax free lump sum of 40% (£145,000)

and take the rest to annuity. (£195,000)

How much should I expect to pay an advisor to get me the best annuity available?

Thanks.

dunstonh

An EPP is more advanced a product than a personal pension. If you are at the scheme retirement age and you have all the documentation available to support the enhanced tax free cash payment then its not too bad. If you don't then that extra risk and work would likely be reflected in the fee.

However, you should find the fee is a cheaper than the non-advised solutions on the web. I would not be surprised to see figures of around £1000-£2000 as your typical ball park.

Good_bad_and_ugly

Voucher,

Ask the adviser for his fee schedule (I think that £2000 equates to something like 1.5 days billable hours plus indemnity and other costs). If your circumstances are straightforward, and don't mention how much money your fund has, ask for a fee based quote.

If the adviser doesn't want to play fair, walk away and find one who does - many still haven't got their heads around the facts we're no longer living in the 80s and 90s. Don't be afraid to negotiate either. As suggested, do a lot of the leg work yourself to reduce costs.

EdGasket

How will you get 40% tax-free when everyone else gets only 25%?

dunstonh

EdGasket wrote: »

How will you get 40% tax-free when everyone else gets only 25%?

It is an EPP. EPPs taken out prior to April 2006 have the potential to pay an increased tax free lump sum.

To find out the actual lump sum possible is quite an admin task in many cases.

jamesd

ivavoucher wrote: »

and take the rest to annuity. (£195,000) ... How much should I expect to pay an advisor to get me the best annuity available?

Just in case you don't know it, a person who reaches state pension age before the flat rate state pension comes in can get a 10.4% increase per year of deferring it, inflation-linked and mostly inheritable by a spouse. A person reaching state pension age after the flat rate comes in gets 5.8% inflation-linked but not inheritable.

Both of those rates are well in excess of anything that a normal annuity will get you.

It's also worth knowing that the requirement to buy an annuity was first eliminated back in 2006 when Alternatively Secured Pensions were introduced and that governments have repeatedly pointed out that it is no longer necessary. A common guideline for taking income from investments is 4% of the initial capital value increasing with inflation.

Because the safe withdrawing rate for investments is higher than inflation-linked annuities pay at younger ages and the state pension deferral usually pays more once that age is reached, it's usually possible to achieve greater guaranteed income by planning to defer the state pension for a while.

Use great caution in the annuities area because it is common for firms not to even mention the option of deferring the state pension, which typically massively beats what they are selling.

In your case you probably have too much capital to sensibly use deferral for all of it.

ivavoucher

jamesd wrote: »

It's also worth knowing that the requirement to buy an annuity was first eliminated back in 2006 when Alternatively Secured Pensions were introduced and that governments have repeatedly pointed out that it is no longer necessary.

Thanks James.
Unfortunately if you take the 40% tax free cash you are then forced to buy an annuity with the remainder.

kidmugsy

ivavoucher wrote: »

Unfortunately if you take the 40% tax free cash you are then forced to buy an annuity with the remainder.

Ah well, maybe you'll be able to sell it if Osborne is Chancellor again.

There are worse fates than being stuck with an income for life. If we get a decade or three of deflation or stagnation you may feel fairly chuffed.

macca1974

If you've got an EPP (with the Pru? who I think had the old Premier plan), and you have protected tax free cash in excess of 25%, I thought that if you transferred out (which I think would include an open market option to get the best annuity rate), then you had to take the annuity offered by the provider. So it may be that you are stuck with your existing provider for an annuity if you want the 40% tfc. Although I would say it has been ages since I've had anything to do with this so I might be completely wrong!

You don't by any chance have any former colleagues who were (and still are) in the same EPP? If you did and you transferred to a more flexible scheme together (a buddy transfer) then you could retain your 40% tfc and get into a more flexible scheme.

In answer to your question, it used to be 1% or so commission on an annuity pre-RDR, so that might be your starting point with an adviser.

bmm78

Ballpark figures for advice are very difficult for annuities, as advisers are often in competition with non-advised brokers who can still receive commission which is often well in excess of what most advisers charge.

In practice, there is less correlation between the size of the adviser charge and the final annuity rate than there would appear on the surface. A reduction from (eg) £4,000 adviser charge to £1,000 on that size fund would probably make a difference of £150 a year or so. A meticulously completed medical questionnaire, a strong post-quote haggle with the provider, or even just getting a rate refreshed regularly to take account of provider rate movements can all have much more impact than that.

First and foremost you need to be sure that an annuity is the right thing, and regardless of any future legislation they should still be treated as irreversible. Then it's a case of getting the right shape (dependent's pension, guarantee periods, value protection, escalation, overlap, proportion etc), and squeezing every last drop out of the rate and making sure that you meet any deadlines.

There's a lot to get wrong, and getting this done on the cheap can often be a false economy. Equally, a high charge is in no way any guarantee of quality.

Suggested course of action is to vet the adviser over how regularly they arrange annuities, and what their thoughts are on the new rules applying to annuities from April. If they are not familiar with Value Protection, 30 year guarantee periods and nominee annuities it is best to avoid. It is also a good idea to source two different brokers for quotes at the same time and let them slug it out over who can get the best deal.

mania112

£5,650

But are you allowed to use the Open Market? If so, why can't you go down the Drawdown route?