Annuity without using financial adviser

Gudrun

Can anyone give me the names of any reputable annuity providers who do not insist on applications being made through a financial adviser?   Many thanks.

dunstonh

You wouldn't want to use an FA for an annuity purchase.  However, you would want to use an IFA if you are looking for the best rates unless your fund value is low.

Direct-to-provider annuity purchases factor a commission into the annuity rate, and for all but the smallest cases, the commission rate is higher than the fee an adviser may charge

Adviser-arranged annuities have a higher annuity rate as there is no commission factored into the rate.   However, advisers will need to be paid.  You can either pay directly or via the pension.  If paid via the pension, then it comes down to the difference between the commission paid and the fee paid.    If you have health conditions then time and again, the enhanced annuity providers say that IFAs get better terms than direct.  Often down to better form filling by the adviser as they know what is needed and will probe more.   Also down to some haggling which some providers will operate.

As the range of annuity rates varies a fair bit, limiting yourself to a potentially lower rate to avoid the use of an adviser doesn't really make any sense.   Especially when asking that question on a money saving site.

Gudrun

Thank you very much for your helpful reply, dunstonh, it is much appreciated.

I am still interested in contacting a few providers direct, in order to compare for myself the difference between what they offer, and what is available through an independent financial adviser.

I am puzzled that providers charge a commission for direct applications, and appear to prefer the indirect application route through an IFA.

Albermarle

Gudrun said:

Thank you very much for your helpful reply, dunstonh, it is much appreciated.

I am still interested in contacting a few providers direct, in order to compare for myself the difference between what they offer, and what is available through an independent financial adviser.

I am puzzled that providers charge a commission for direct applications, and appear to prefer the indirect application route through an IFA.

Probably it is the same reason that many pension providers will only work via an advisor.
When dealing direct with the public, you can always end up being accused at a later date of selling an inappropriate product for the client.
Some clients may be difficult to deal with.
Many clients will be unable to understand even simple financial concepts
You need to employ call centre staff to answer all the questions.
Etc Etc

Working direct with an advisor, takes out most of these issues for the provider.

dunstonh

I am puzzled that providers charge a commission for direct applications, and appear to prefer the indirect application route through an IFA.

If the IFA does the work, then the provider has do virtually nothing.   Plus, liability is carried by the adviser and not the provider.

If a provider wants to set up a distribution channel, it needs to comply with FCA regulations for distribution and have appropriate staffing and compliance etc..  Whereas without a distribution channel, it only has to comply with regulations for a product manufacturer.  So, there is a cost difference there.      

Historically, most annuity business was arranged via IFAs (not FAs).  So, the distribution channel favoured that.

Gudrun

Thank you Albermarie and dunstonh.   Your replies have been extremely helpful.

zagfles

Gudrun said:

Thank you very much for your helpful reply, dunstonh, it is much appreciated.

I am still interested in contacting a few providers direct, in order to compare for myself the difference between what they offer, and what is available through an independent financial adviser.

I am puzzled that providers charge a commission for direct applications, and appear to prefer the indirect application route through an IFA.

What he neglected to mention was that you can negotiate a rebate of commission with annuity brokers, see this article https://www.thisismoney.co.uk/money/pensions/article-9749773/Im-buying-annuity-55k-pot-does-broker-gets-commission.html

So probably worth getting quotes from both brokers and IFAs. If you use an IFA worth checking for ombudsman decisions against them, see https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions

Gudrun

Very interesting, zagfles, I will take a look at all that.   Many thanks.

incus432

Apologies for jumping in on this old thread but I have been looking at taking out a fixed term annuity from a SIPP (120k before lump sum) for 8 years to fill a gap before state pension. Based on the useful advice here I understand an IFA can get better rates because they charge a fee to the client rather than get paid commission by the annuity provider.  

I therefore got a name from Unbiased. However this IFA told me he would have to conduct a full review of our finances and charge accordingly. Pressed he said he could give 'limited advice' on a fixed term annuity and would be paid by 3% commission paid by the insurer (ie c £2700). (I thought this was no longer alllowed?)  I told him I had understood I would pay him a fee for the service/advice and get a better 'no commission' annuity rate/ However it seems he will not do this without doing a full review.

Is this expected or will I get a more helpful response from another IFA (i have now tried Vouchedfor).  I am reluctant to enter into a full review of our finances and end up having to pay large fees for this when I am reasonably sure (within limits) what I need, and have managed our SIPPs, ISAs and planning for 20 years. If I am only getting the 'commission rate' annuity I might as well just use a broker.

Thoughts welcome

MallyGirl

you might do better by finding a local IFA - especially if you can get personal recommendation - rather than one that has paid for an entry in unbiased etc.

dunstonh

I therefore got a name from Unbiased. However this IFA told me he would have to conduct a full review our finances and charge accordingly. Pressed he said he could give 'limited advice' on a fixed term annuity and that would be paid by 3% commission paid by the insurer (ie c £3000). (I thought this was no longer alllowed?)  I told him I had understood I would pay him a fee for the service/advice and get a better 'no commission' annuity rate/ However it seems he will not do this without doing a full review.

A couple of things there:
1) Unbiased has seen an exodus of IFAs, and it's mostly FAs and wealth management companies on there now along with only a small number of regional IFAs who are often expensive (they have to be to cover the cost of being on unbiased - unbiased has priced out the small localised firms)
2) It is up to the advice company whether they offer limited advice, full advice or execution only.      There appears to be some confusion here as both full advice and limited advice can only be done on fee basis.  Whereas execution can only be commission or fee agreed basis.     Advice cannot be commission basis (whether limited or full).   Any hint of advice and it is classed as advice and commission is not allowed.

There are different business models for different advice firms.    Some will only allow their staff to do certain things.

Is this expected or will I get a more helpful response from another IFA (i have now tried Vouchedfor).

Vouchedfor is even more expensive than unbiased.   If my memory is correct, they take a cut of fee income from that lead.    Again, most IFA firms don't appear on vouchedfor.

 I am reluctant to enter into a full review of our finances and end up having to pay large fees for this when I am reasonably sure (within limits) what I need and have managed our SIPPs and ISAs and planning for 20 years. 

Ask them if they do "execution only" where you are using them to get provider quotes and facilitate the application.  That is more likely to be available in a smaller general practitioner firm rather than a regional or national firm (whose existence is to mop up assets under management and puts limitations on what staff can and cannot do).