grateful for any advice about financial advisers in relation to annuities

54cornishgirl

I'm recently retired, I've always been self-employed so I have no work-place pension but I do have a modest amount saved in two pension funds.  I'm cautious by nature and favour an annuity so that I will know what income I will have to live on.  I know nothing about financial advisers and how I would choose one from another - or indeed whether I should go to one of the big companies like Hargreaves Lansdown - and, being of an independent nature, I also wondered whether, rather than asking an IFA, I would do just as well to get annuity quotes from one of the pension companies that come high on the list when I put my details into the Money Helper website - like Scottish Widows or Aviva - or whether, if I found a good IFA, they would be able to get me a better rate than I could if I go the pension companies directly? I'm very much a novice in this area and would be grateful for opinions. 

wjr4

How much are your pensions worth overall?

Linton

An IFA will dicuss weith you and document the things you want from an annuity - there are a lot of options available and you may want guidance and explanation. They will then serarch the whole of the market for the best deal.  The annuity companies charge IFAs less than they charge direct customers since the cost and hassle to them is reduced.

So I believe that getting an annuity from an IFA is pretty much a no-brainer.

Albermarle

54cornishgirl said:

I'm recently retired, I've always been self-employed so I have no work-place pension but I do have a modest amount saved in two pension funds.  I'm cautious by nature and favour an annuity so that I will know what income I will have to live on.  I know nothing about financial advisers and how I would choose one from another - or indeed whether I should go to one of the big companies like Hargreaves Lansdown - and, being of an independent nature, I also wondered whether, rather than asking an IFA, I would do just as well to get annuity quotes from one of the pension companies that come high on the list when I put my details into the Money Helper website - like Scottish Widows or Aviva - or whether, if I found a good IFA, they would be able to get me a better rate than I could if I go the pension companies directly? I'm very much a novice in this area and would be grateful for opinions. 

It is not just about value for money. We ( laypeople) tend to think just about the standard types of annuity. e.g. Level terms or linked to inflation : Sole life or 50% for spouse on death etc
However there are many more possible variations, and many will be only available via an IFA.
It is a bit like if you need special insurance with special terms, you need to go to an insurance broker, rather than a simple on line insurer.

xylophone

whether, if I found a good IFA, they would be able to get me a better rate than I could if I go the pension companies directly? I'm very much a novice in this area and would be grateful for opinions. 

If you are looking for an Independent Financial Adviser you might try searching here

https://adviserbook.co.uk/

When the menu comes up on the left hand side you would tick "confirmed independent" and

"pensions and retirement".

You could then ring round to discuss your requirements.

[Deleted User]

If it was me, I would look for a specialist, someone with in depth knowledge of risk pricing and specifically annuities. More than a standard short course requirement for advisors (like Level 4 Diploma). Someone who has a diploma in actuarial sciences  would have technical skills. 

Its a complex technical field with a lot of options and the decision is irreversible.  Once the type of annuity, risks and benefits fitting your circumstances are fully understood, then picking the most cost efficient product is the easy part. 

Malthusian

Deleted_User said:

If it was me, I would look for a specialist, someone with in depth knowledge of risk pricing and specifically annuities. More than a standard short course requirement for advisors (like Level 4 Diploma). Someone who has a diploma in actuarial sciences  would have technical skills. 

Its a complex technical field with a lot of options and the decision is irreversible.  Once the type of annuity, risks and benefits fitting your circumstances are fully understood, then picking the most cost efficient product is the easy part. 

Actuaries are trained to price annuities correctly. Advisers are trained to select and recommend the annuity that is right for you (if any).
Your suggestion is equivalent to saying you should hire an architect to act as your estate agent, because architects know way more about houses than an estate agent.

[Deleted User]

Malthusian said:

Deleted_User said:

If it was me, I would look for a specialist, someone with in depth knowledge of risk pricing and specifically annuities. More than a standard short course requirement for advisors (like Level 4 Diploma). Someone who has a diploma in actuarial sciences  would have technical skills. 

Its a complex technical field with a lot of options and the decision is irreversible.  Once the type of annuity, risks and benefits fitting your circumstances are fully understood, then picking the most cost efficient product is the easy part. 

Actuaries are trained to price annuities correctly. Advisers are trained to select and recommend the annuity that is right for you (if any).
Your suggestion is equivalent to saying you should hire an architect to act as your estate agent, because architects know way more about houses than an estate agent.

Actuary is an example of an educated person with technical skills. Many people with this type of education work as advisors.

My concern is that the qualification requirements for IFAs are minimal. Unless the individual has university level stats and other skills, he won’t understand essential concepts. He might be great at selling and people skills but this is a highly technical subject.  

There are some cool developments in this field as well. For example in the field of variable annuities. One needs education to deal with the subject. Now if you are already set on a very specific simple annuity product then any broker with access to the full market can do the job.

Linton

Deleted_User said:

Malthusian said:

Deleted_User said:

If it was me, I would look for a specialist, someone with in depth knowledge of risk pricing and specifically annuities. More than a standard short course requirement for advisors (like Level 4 Diploma). Someone who has a diploma in actuarial sciences  would have technical skills. 

Its a complex technical field with a lot of options and the decision is irreversible.  Once the type of annuity, risks and benefits fitting your circumstances are fully understood, then picking the most cost efficient product is the easy part. 

Actuaries are trained to price annuities correctly. Advisers are trained to select and recommend the annuity that is right for you (if any).
Your suggestion is equivalent to saying you should hire an architect to act as your estate agent, because architects know way more about houses than an estate agent.

Actuary is an example of an educated person with technical skills. Many people with this type of education work as advisors.

My concern is that the qualification requirements for IFAs are minimal. Unless the individual has university level stats and other skills, he won’t understand essential concepts. He might be great at selling and people skills but this is a highly technical subject.  

There are some cool developments in this field as well. For example in the field of variable annuities. One needs education to deal with the subject. Now if you are already set on a very specific simple annuity product then any broker with access to the full market can do the job.

Designing annuities for the general market is a highly technical subject.  As Mathusian points out that is a totally different skill to helping a client choose the appropriate facilities for their particular circumstances. IFAs dont design annuities, they configure annuities provided by annuity specialists.  Y0u dont need stats to understand an off the shelf annuity.  It does what it says on the label and costs what is written on the price tag.

Variable annuities are not mainstream in the UK and I doubt that  they are appropriate for most people.   AIUI they involve risk.  People buy annuities to remove risk.  I have never met one, but reading up on them I do not see where they differ from a combination of a standard annuity and standard drawdown. Perhaps you can explain.

Beddie

A couple of suggested reads:

https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/annuities/annuity-rates-aly8c2z86kds
https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities#

Then as said above - speak to an IFA or two.

[Deleted User]

Linton said:

Deleted_User said:

Malthusian said:

Deleted_User said:

If it was me, I would look for a specialist, someone with in depth knowledge of risk pricing and specifically annuities. More than a standard short course requirement for advisors (like Level 4 Diploma). Someone who has a diploma in actuarial sciences  would have technical skills. 

Its a complex technical field with a lot of options and the decision is irreversible.  Once the type of annuity, risks and benefits fitting your circumstances are fully understood, then picking the most cost efficient product is the easy part. 

Actuaries are trained to price annuities correctly. Advisers are trained to select and recommend the annuity that is right for you (if any).
Your suggestion is equivalent to saying you should hire an architect to act as your estate agent, because architects know way more about houses than an estate agent.

Actuary is an example of an educated person with technical skills. Many people with this type of education work as advisors.

My concern is that the qualification requirements for IFAs are minimal. Unless the individual has university level stats and other skills, he won’t understand essential concepts. He might be great at selling and people skills but this is a highly technical subject.  

There are some cool developments in this field as well. For example in the field of variable annuities. One needs education to deal with the subject. Now if you are already set on a very specific simple annuity product then any broker with access to the full market can do the job.

Designing annuities for the general market is a highly technical subject.  As Mathusian points out that is a totally different skill to helping a client choose the appropriate facilities for their particular circumstances. IFAs dont design annuities, they configure annuities provided by annuity specialists.  Y0u dont need stats to understand an off the shelf annuity.  It does what it says on the label and costs what is written on the price tag.

Variable annuities are not mainstream in the UK and I doubt that  they are appropriate for most people.   AIUI they involve risk.  People buy annuities to remove risk.  I have never met one, but reading up on them I do not see where they differ from a combination of a standard annuity and standard drawdown. Perhaps you can explain.

There are multiple types of variable annuities and other than knowing the basics and having read a couple of books some time ago, I don’t know the details. But I know enough to understand that when the time comes I will want to talk to an expert rather than a broker/intermediary who understands % per year and thats about it.  And while I won’t be DIYing investments if I live to 80, fixed annuity is probably not the answer either. 

Yes, annuities remove risk. Invariably they remove some risks while leaving others. Variable annuities in my understanding play the role of a group pension; you get professional management and a large pool of funds, averaging longivity so you don’t HAVE to die after 30 years of retirement. Fundamentally, variable annuities place investments into investment sub accounts with variable rates of return. They can have a portion in a sub-account providing fixed returns in the same manner as a fixed annuity. And you can have them deferred.

There is quite a bit of new research in this field with new products coming up trying to reproduce DB pensions where pooled investor resources are managed effectively in the same manner but in case of low probability persistently poor performance the payouts are reduced rather than having your firm fund the shortfall. A type of annuity which wasn’t available 6 months ago might be available today. Annuity providers can do things no individual investor can.

You also get fixed index annuities (which are fixed rather than variable), annual resets, various caps and guaranteed payouts and various crediting methods. 

To me its an investment product, part of the overall portfolio and I also want to fully understand returns, fees charged by the provider, etc. 

My suspicion is that variable annuities are a lot more appropriate for most people than using a bunch of mutual funds. Prof Moshe Milevsky is one of the leading proponents, among others; you can google for his lectures and books.  There is a lot of cross fertilization between countries; some annuity options only available in France in 2021 are available in Canada and the US in 2022.