Annuity without using financial adviser

FIREDreamer

dunstonh said:

rebs said:

dunstonh said:

rebs said:

I'm just in the process of arranging a fixed term annuity and also did not want to have to deal with an advisor or any sort.

I looked on the moneyhelper comparison and found a couple that would deal direct, which I have looked at.  The best option didn't allow partial transfers - there may have been a work around, but their process of communication was just so awful that I moved onto to the next best one, which is Legal & General - so far it has been super quick and smooth.

How much commission did L&G take?

I don't know - they just quoted a price. It's a price I am ok with so I don't entirely care how that is made up.  

When you buy direct, you get a lower annuity rate as they price the commission into the rate.    
When you buy via a non-advised broker, they price the commission into the annuity rate.
When you buy via an adviser (whether advised or execution only), you get the nil commission annuity rate but their fee gets taken from the pension (or can be paid directly).

The nil commission annuity rate will be better than the commission annuity rate.   So, it all comes down to how much the fee to see what difference it makes.

On a small fund, there won't be much of a difference but £50k plus, an adviser on fee basis should be able to beat the commission option.

Whilst you didn't want to deal with an adviser, you probably ended up paying more in commission than the fee you could have paid the adviser and got a better rate (unless it was a small fund).      

Just Annuities paid 0.8% of my annuity purchase price to Hargreaves Lansdown as I took my annuity through their portal. This was about £5,000. Not sure how good or bad it was, but the annuity was miles better than the other 4 quotes at the time on the same portal.

wjr4

FIREDreamer said:

dunstonh said:

rebs said:

dunstonh said:

rebs said:

I'm just in the process of arranging a fixed term annuity and also did not want to have to deal with an advisor or any sort.

I looked on the moneyhelper comparison and found a couple that would deal direct, which I have looked at.  The best option didn't allow partial transfers - there may have been a work around, but their process of communication was just so awful that I moved onto to the next best one, which is Legal & General - so far it has been super quick and smooth.

How much commission did L&G take?

I don't know - they just quoted a price. It's a price I am ok with so I don't entirely care how that is made up.  

When you buy direct, you get a lower annuity rate as they price the commission into the rate.    
When you buy via a non-advised broker, they price the commission into the annuity rate.
When you buy via an adviser (whether advised or execution only), you get the nil commission annuity rate but their fee gets taken from the pension (or can be paid directly).

The nil commission annuity rate will be better than the commission annuity rate.   So, it all comes down to how much the fee to see what difference it makes.

On a small fund, there won't be much of a difference but £50k plus, an adviser on fee basis should be able to beat the commission option.

Whilst you didn't want to deal with an adviser, you probably ended up paying more in commission than the fee you could have paid the adviser and got a better rate (unless it was a small fund).      

Just Annuities paid 0.8% of my annuity purchase price to Hargreaves Lansdown as I took my annuity through their portal. This was about £5,000. Not sure how good or bad it was, but the annuity was miles better than the other 4 quotes at the time on the same portal.

£5000 is an insane fee for an annuity! Also, why did you purchase an annuity with your entire fund? Just out of curiosity. 

Cobbler_tone

The world continues to move on at a pace. Most 'basic' info and options are there to get for competent users. There is still an important place for IFA's and FA's, the same as there is for mortgage advisors. I can remember the times when the default was to go to a mortgage advisor because they would get the promise of better rates. That is without going back to the days of in-branch car insurance! 

The important thing is comparing what you are paying/getting and not shelling a considerable chunk of cash out to find out you could have done it yourself. At least you should be able to have an initial chat with most to try and establish what you need and a level of confidence in who you are dealing with.
Clearly many financial situations and dilemmas may be too complex to navigate alone.  Word of mouth has to be the best method of finding the best people (whether that is an IFA or plumber...a good mechanic is worth their weight in gold!), especially when considering fishing in the murky minefield of the internet, regulated or not. 

FIREDreamer

wjr4 said:

FIREDreamer said:

dunstonh said:

rebs said:

dunstonh said:

rebs said:

I'm just in the process of arranging a fixed term annuity and also did not want to have to deal with an advisor or any sort.

I looked on the moneyhelper comparison and found a couple that would deal direct, which I have looked at.  The best option didn't allow partial transfers - there may have been a work around, but their process of communication was just so awful that I moved onto to the next best one, which is Legal & General - so far it has been super quick and smooth.

How much commission did L&G take?

I don't know - they just quoted a price. It's a price I am ok with so I don't entirely care how that is made up.  

When you buy direct, you get a lower annuity rate as they price the commission into the rate.    
When you buy via a non-advised broker, they price the commission into the annuity rate.
When you buy via an adviser (whether advised or execution only), you get the nil commission annuity rate but their fee gets taken from the pension (or can be paid directly).

The nil commission annuity rate will be better than the commission annuity rate.   So, it all comes down to how much the fee to see what difference it makes.

On a small fund, there won't be much of a difference but £50k plus, an adviser on fee basis should be able to beat the commission option.

Whilst you didn't want to deal with an adviser, you probably ended up paying more in commission than the fee you could have paid the adviser and got a better rate (unless it was a small fund).      

Just Annuities paid 0.8% of my annuity purchase price to Hargreaves Lansdown as I took my annuity through their portal. This was about £5,000. Not sure how good or bad it was, but the annuity was miles better than the other 4 quotes at the time on the same portal.

£5000 is an insane fee for an annuity! Also, why did you purchase an annuity with your entire fund? Just out of curiosity. 

It wasn’t purchased with my whole drawdown fund, just 2/3 of it. I wanted guaranteed income to enable me to retire and my wife won’t want to manage an investment portfolio.

Still loads of investments in equities though.

I don’t think my annuity was mis bought and we still have assets in excess of £1m plus a, maybe, £300k house.

dunstonh

Just Annuities paid 0.8% of my annuity purchase price to Hargreaves Lansdown as I took my annuity through their portal. This was about £5,000. Not sure how good or bad it was, but the annuity was miles better than the other 4 quotes at the time on the same portal.

I would put that a target fee at around £1500 via an IFA. 

Last time I had someone obtain annuity quotes from HL and from myself, my fee was slightly higher than HL (it was a smaller fund) but we got over £1000 a year more income.   Most of that, though, was because the person had poorly completed the health questionnaire.  I pushed them for more information and filled many of the gaps and got the annuity rate moved up.   Without that, it would have been closer.  But the broker just accepted what was first given and didn't question the gaps.

Plus, Just is one of the companies that often haggle their annuity rate upwards, and there was a little bit of that.  They have a real time system, unlike the quote portal which is a snapshot updated less frequently, which often allows them some space to revise the terms upwards (you get either the existing snaphot or the uprated price if real time rates are better).

The world continues to move on at a pace. Most 'basic' info and options are there to get for competent users. There is still an important place for IFA's and FA's, the same as there is for mortgage advisors. I can remember the times when the default was to go to a mortgage advisor because they would get the promise of better rates. That is without going back to the days of in-branch car insurance! 

When the mortgage market is busy, and the lenders lack in-house capacity, brokers tend to get given broker-specific deals that are better to reduce the applications going direct to the lender.  When the lenders have excess capacity, they tend to remove the deals or make them broadly similar.

With annuities, it really is about the fee vs commission on clean health cases and the ability to complete a medical questionnaire 

Word of mouth has to be the best method of finding the best people (whether that is an IFA or plumber...a good mechanic is worth their weight in gold!)

The problem is that word of mouth is only as a good as the knowledge of the person doing the recommendation.   Most facebook community groups will see people recommend SJP reps when someone asks for an IFA recommendation.  

DullGreyGuy

Gudrun said:

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

They have to cover the cost of sales, it's expensive to run advertising, have call centres and websites for doing quotes etc. Staff may get commission too. They are also taking on liability for miss-selling etc which will partially be offset by insurance that isn't cheap and certainly won't cover it all. The Pru total cost for its misselling of annuities was several times the £166m insurance cover they had. 

FIREDreamer

dunstonh said:

Just Annuities paid 0.8% of my annuity purchase price to Hargreaves Lansdown as I took my annuity through their portal. This was about £5,000. Not sure how good or bad it was, but the annuity was miles better than the other 4 quotes at the time on the same portal.

I would put that a target fee at around £1500 via an IFA. 

Last time I had someone obtain annuity quotes from HL and from myself, my fee was slightly higher than HL (it was a smaller fund) but we got over £1000 a year more income.   Most of that, though, was because the person had poorly completed the health questionnaire.  I pushed them for more information and filled many of the gaps and got the annuity rate moved up.   Without that, it would have been closer.  But the broker just accepted what was first given and didn't question the gaps.

Plus, Just is one of the companies that often haggle their annuity rate upwards, and there was a little bit of that.  They have a real time system, unlike the quote portal which is a snapshot updated less frequently, which often allows them some space to revise the terms upwards (you get either the existing snaphot or the uprated price if real time rates are better).

The world continues to move on at a pace. Most 'basic' info and options are there to get for competent users. There is still an important place for IFA's and FA's, the same as there is for mortgage advisors. I can remember the times when the default was to go to a mortgage advisor because they would get the promise of better rates. That is without going back to the days of in-branch car insurance! 

When the mortgage market is busy, and the lenders lack in-house capacity, brokers tend to get given broker-specific deals that are better to reduce the applications going direct to the lender.  When the lenders have excess capacity, they tend to remove the deals or make them broadly similar.

With annuities, it really is about the fee vs commission on clean health cases and the ability to complete a medical questionnaire 

Word of mouth has to be the best method of finding the best people (whether that is an IFA or plumber...a good mechanic is worth their weight in gold!)

The problem is that word of mouth is only as a good as the knowledge of the person doing the recommendation.   Most facebook community groups will see people recommend SJP reps when someone asks for an IFA recommendation.  

So I overpaid £3,500 for the service. At a 4% annuity rate that’s £10 a month lost in annuity payments (or less as higher rate taxpayer when state pension kicks in). I think I can live with that given the Just annuity was nearly £2,000 pa more than its nearest competitor.

I certainly don’t feel aggrieved or unhappy. Paying an LTA charge that was avoidable 3 years later, now that does boil my pee somewhat, but it was only 7% of our total wealth plus many lost more than that in bond funds that will never recover when I had the courage (*) to be 100% equities until I bought the annuity.

(*) EDIT : or stupidity or luck

Cobbler_tone

With annuities, it really is about the fee vs commission on clean health cases and the ability to complete a medical questionnaire 

Word of mouth has to be the best method of finding the best people (whether that is an IFA or plumber...a good mechanic is worth their weight in gold!)

The problem is that word of mouth is only as a good as the knowledge of the person doing the recommendation.   Most facebook community groups will see people recommend SJP reps when someone asks for an IFA recommendation.  

You have to start somewhere. I'll ask my richest friends or come and see you in a couple of years. 

dunstonh

So I overpaid £3,500 for the service. At a 4% annuity rate that’s £10 a month lost in annuity payments (or less as higher rate taxpayer when state pension kicks in). I think I can live with that given the Just annuity was nearly £2,000 pa more than its nearest competitor.

I did a quote for someone yesterday and using their details but upping the fund value to match the ballpark of what yours was, it came out at £242 a year different.   Remember that the order of the providers would be the same. So, the top provider on commission would still have been top on fee.   However, the annuity amount would be different.

Not a great difference in a single year, but it would add up cumulatively.   However, in the scheme of things, it isn't life-changing!

FIREDreamer

dunstonh said:

So I overpaid £3,500 for the service. At a 4% annuity rate that’s £10 a month lost in annuity payments (or less as higher rate taxpayer when state pension kicks in). I think I can live with that given the Just annuity was nearly £2,000 pa more than its nearest competitor.

I did a quote for someone yesterday and using their details but upping the fund value to match the ballpark of what yours was, it came out at £242 a year different.   Remember that the order of the providers would be the same. So, the top provider on commission would still have been top on fee.   However, the annuity amount would be different.

Not a great difference in a single year, but it would add up cumulatively.   However, in the scheme of things, it isn't life-changing!

Not life changing whereas not being able to foresee the LTA going was more painful. I lost £70,000 of my pot unnecessarily as I could have just crystallised to LTA only. Given I can only realistically empty my pension pot at 40% tax it’s technically only £42,000 I have lost I suppose. My remaining drawdown pot is £375k approximately.

There was potentially a £20k LTA charge on the drawdown growth when I bought the annuity (drawdown growth was £80k) but fortunately the kind Mr Hunt had set the LTA charge to 0% by then. Thanks Jeremy.

I have 1 small pot left of £10k to take via Hargreaves (2 bites of that cherry already taken) and if I pay in £3,600 gross every year up to 75 I can just about extract the full £268,275 PCLS available using my TTFC certificate. 

Note: I did not take PCLS when one DB commenced so a TTFC certificate was worth having. 

Maybe I can get £3,600 with 40% tax relief on it by drawing down an amount to make my DB plus annuity plus drawdown withdrawal equal to £50,270 plus £3,600.