We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Open market Annuity charges

Can anyone help.

What are the typical charges associated with the purchase of an open market annuity. I am assuming my existing provider, while not matching the open market rate, will apply similar charges.
«13

Comments

  • dunstonh
    dunstonh Posts: 118,615 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    there are no explicit charges. OMOs work on "what you see is what you get".

    Commission is payable on the plans to an adviser. However, most providers will not improve the terms if you go direct but instead keep the commission for themselves. If you are not seeking advice from an IFA, then you may be better off going execution only via an IFA to improve the terms.

    If you have a Pru or NU pension with guaranteed annuity rates then it is often worth getting an IFA involved as NU and PRU will pay an IFA without it impacting on your terms at all and you get all the paperwork done for you and FOS protection as well at no cost.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    benny5 wrote: »
    Can anyone help.

    What are the typical charges associated with the purchase of an open market annuity. I am assuming my existing provider, while not matching the open market rate, will apply similar charges.


    Anything from around 1.5 to 3% (latter for enhanced annuities).Bargain hard.
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 118,615 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Those are not charges Ed but commissions and you will find that its typically 1% to 1.5% although "some" enhanced annuities allow the adviser to take more by agreement.

    Charges and commissions are two different things.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    In this case I'd have though the OP was referring to commissions as there are no actual charges involved in standard annuities, ie they are a bit like interest on a cash deposit.The provider's "take" is deducted in advance.
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 118,615 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    It's not what benny asked though. Just as people dont ask what commissions banks earn on savings accounts. You look at the rate.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Thanks for your replies.

    The clarification I was seeking centered around my current fund valuation of £XXXXXX and the annuity offered. Based on this current fund value, 'open market' provider's figures appear higher. The question is are these 'open market' figures inclusive or exclusive of any deduction (charge/Commission), I don't know if I am comparing like with like.

    Hope this make sense.

    Benny
  • dunstonh
    dunstonh Posts: 118,615 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Based on this current fund value, 'open market' provider's figures appear higher.
    Is it a with profits fund?

    If so, this will include the final bonus accrued to date. The running value often does not include the final bonus or shows it seperatly.

    The question is are these 'open market' figures inclusive or exclusive of any deduction (charge/Commission), I don't know if I am comparing like with like.

    The Open market option value is the value on maturing the policy. The current value (as said above) may not include final bonuses which would be added on commencement with the provider or open market option.

    You need to get commencement figures from the provider and then compare those to the open market option figures.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    It may be worth talking to the people at TPAS https://www.pensionsadvisoryservice.org.uk

    They are setting up a special site to help people use the OMO by order of the Treasury - it's not yet done, but they should be able to answer any queries.

    The insurer should state somewhere on the annuity quote if it is paying commission to your advisor and how much.if it isn;pt paying commission to anyone it will just keep the money.

    It might also be worth contacting https://www.cavendishonline.co.uk a discount broker who may be able to rebate the commission.

    The quotes on the FSA site assume the commission is being taken.

    https://www.fsa.gov.uk/tables
    Trying to keep it simple...;)
  • benny5
    benny5 Posts: 245 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    dunstonh wrote: »
    Is it a with profits fund?

    If so, this will include the final bonus accrued to date. The running value often does not include the final bonus or shows it seperatly.

    The Open market option value is the value on maturing the policy. The current value (as said above) may not include final bonuses which would be added on commencement with the provider or open market option.

    You need to get commencement figures from the provider and then compare those to the open market option figures.

    It is not a with profits fund. The provider's, (Blackrock) statement shows the fund value together with various annuity options. I was making my comparisons based on these figures. Was this correct?
  • dunstonh
    dunstonh Posts: 118,615 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Is the value a projected value rather than an actual value?
    i.e. if you retire on 1st January 2008?

    This is quite common and would lead to different values as one is the value of the pension now and the other is the value projected at 7% growth for the remaining months.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.4K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.5K Spending & Discounts
  • 241K Work, Benefits & Business
  • 617.4K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.