trying to find out whether an IFA can get a better pension annuity rate than I can on my own

54cornishgirl

I posted a question recently and got some good advice about pension annuities but I still have what seems to me to be a basic question.  I've done some research myself into companies that offer pension annuities and the question that keeps coming back to me is - can an IFA get a better quote than I can by contacting the companies directly.  I've now spoken to two IFAs - one of them told me that I would be offered the same rates that he would, the other IFA said they would definitely be able to get better rates.  I understand that an IFA will look at the whole market but - unless I'm really not understanding things - there are only about half a dozen providers and I can therefore easily speak to them myself.  I've been through the options about the cash free lump sum, level rather than index-linked, guarantee periods, single rather than joint so I've got some grasp of the complexity of the options are but this question of whether an IFA can get a better rate than I can still niggles at me.  I would be really grateful to know the answer.

dunstonh

I've done some research myself into companies that offer pension annuities and the question that keeps coming back to me is - can an IFA get a better quote than I can by contacting the companies directly.  

In most cases, yes.

 I've now spoken to two IFAs - one of them told me that I would be offered the same rates that he would, the other IFA said they would definitely be able to get better rates

The first one is wrong. The second one is too confident.

 I understand that an IFA will look at the whole market but - unless I'm really not understanding things - there are only about half a dozen providers and I can therefore easily speak to them myself. 

You can speak to some of them but not all of them.   You will also get their annuity rate with commission factored into it. IFAs cannot be paid a commission. So, the annuity rate is higher as its nil commission terms.  However, the IFA will have a fee. That fee can be paid by you directly or taken from the pension pot (usually the most tax efficient way).     If the fee is lower than the commission, then this should result in the annuity rate to you being higher from the IFA.

In addition to that, some of the annuity providers give better annuity rates for IFAs than they do direct to consumer as the IFA is doing all of the work and taking on the liability.  Whereas those they do themselves require them to do the work and take on the liability.  So, there are commercial differences with some providers.

So, if we assume a provider that doesn't have a commercial difference in the gross rate and just factors in commission.  if the commission equated to 3% of the value, then an IFA charging 1% would come in cheaper.    For larger pots, it can make more of a difference if the IFA has a capped fee.  If the IFA has a collar fee and the pot is small, then it would be worse.

 I've been through the options about the cash free lump sum, level rather than index-linked, guarantee periods, single rather than joint so I've got some grasp of the complexity of the options

Have you looked at value protect?    I tend to use that more than guarantee periods nowadays, although we did a 30 year guarantee not too long back.  Value protect is not implemented the same way across the providers.   Some only do it on second death.  Some give the choice of first or second death.