Pension advice please/commission charges

hethmar

My 65 year old husband has three pots, one is an occupational one which is very worthwhile and we have decided to take that one as per the annuity/guarantees/escalation/lumpsum that it gives. So that one aside

The other two is a small Equitable life plus a Friends Life which add together to be £149,154. After taking the max 25% this pot is £111865.

There is a slight enhancement for a health condition and having run a check on different providers on Hargreaves Lansdowne's website, we can get an annuity of about £900 per annum above the FriendsLife annuity offered (on the same option basis). The equitable life is only £8900, and Ive not got a figure for an annuity from them due to the situation with that company.

Well and good but when I look at the small print I see the annuity provider will pay £2600 commission to HL for this contract.

Im just wondering how HL has earned that £2600 when basically we have not received any advice, just entered our figures, chosen our options and clicked a computer button?

Am I getting this correct please? Can anyone advise whether I should go elsewhere or straight to annuity providers and avoid such a large lump of money taken from the pot?

dunstonh

Im just wondering how HL has earned that £2600 when basically we have not received any advice, just entered our figures, chosen our options and clicked a computer button?

It doesnt matter whether they have earned it or not. That is how the commission system works.

Can anyone advise whether I should go elsewhere or straight to annuity providers and avoid such a large lump of money taken from the pot?

Going direct to annuity providers will reduce your selection as many dont offer their product direct. Those that do will still factor a commission into the price.

The cheapest option for you is to use an IFA. Advice is cheaper than non-advice on funds over approx £25k

atush

Basically, if you use an IFA, the rate they will get you (esp with il health) is likely to be more than the fee they will charge (which is paid via the fund so the advice will cost less due to the tax relief)

zagfles

Annuities are one of the few financial products where charges are still murky and the rates you get have commission intended for financial advisers or brokers built in.

Some brokers will refund part of the commission to you, some examples in the thread linked below. Or as above, get quotes from IFAs, but shop around yourself too.

Have a look at this thread and the links:

https://forums.moneysavingexpert.com/discussion/4896690

dunstonh

and the rates you get have commission intended for financial advisers or brokers built in.

IFAs get the product priced on nil commission as they cant receive commission. Hence why they are cheaper. And that is before the haggling too.

zagfles

dunstonh wrote: »

IFAs get the product priced on nil commission as they cant receive commission. Hence why they are cheaper. And that is before the haggling too.

But of course the advice fee will be added instead.

So as I said in the other thread, shop around, get the best deal you can, haggle yourself, and then challenge an IFA or two to beat the best rate you found, net of advice fees.

dunstonh

But of course the advice fee will be added instead.

But a fee of £500-£1500 is better than a commission of £2600.

zagfles

dunstonh wrote: »

But a fee of £500-£1500 is better than a commission of £2600.

Indeed it is which is why it's sensible to shop around like I said. Not just compare one broker with one IFA.

I'm sure some IFAs will want more than that in advice fees, and some brokers will retain all the commission, others will rebate some.

The linked thread has a few good articles for the OP to peruse.

xylophone

OP, if you have the security of a DB pension and state pensions, what is you reason for choosing an annuity rather than going into drawdown?

When do you reach state pension age?

tony4147

Am I correct that at age 65 your husband is getting an annuity of £8,900 / pa for £111,865 from Equitable Life?
and £9,800 / pa from Friends Life?

hethmar

Hi, no, sorry if its not clear. The pots we are using for the quotes add up to £149,154 (equitable and Friendslife)