Annuity without using financial adviser

zagfles

FIREDreamer said:

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. 

What, create a 40% tax liability in order to get 40% tax relief  

Whatever your income level, unless below the PA, drawing down an extra £3600 gross in order to pay £3600 gross back into a pension makes zero difference to your net income, makes zero difference to your total pension pot, all it does is "uncrystallises" £3600. Which may be worth doing if you don't have enough uncrystallised to use up any LSA remaining. But relies on the rules not being changed again (eg bring back the LTA etc). 

zagfles

FIREDreamer said:

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

And just think how much you've saved over the years not using an IFA to manage your portfolio, even at 0.5% pa, which I believe is at the low end of the scale, that's probably several tens of thousands over the years. 

FIREDreamer

zagfles said:

FIREDreamer said:

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. 

What, create a 40% tax liability in order to get 40% tax relief  

Whatever your income level, unless below the PA, drawing down an extra £3600 gross in order to pay £3600 gross back into a pension makes zero difference to your net income, makes zero difference to your total pension pot, all it does is "uncrystallises" £3600. Which may be worth doing if you don't have enough uncrystallised to use up any LSA remaining. But relies on the rules not being changed again (eg bring back the LTA etc). 

I have approx £10,600 tax free allowance left of £268,275 so I need £42,400 in my pot plus another £5,000 to get a third £10,000 fiddled small pot via Hargreaves Lansdown.

So need £48,000 in my pot to maximise tax free cash - 13 years of £3,600 gross. I am 60 so that will be easily done by 75 if I live that long and will crystallise £3,600 each year after taking my £10k small pot. I am retired and not intending to return to work.

Getting 40% relief is just a way of ensuring I maximise my 20% tax rate band income fully.

zagfles

FIREDreamer said:

zagfles said:

FIREDreamer said:

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. 

What, create a 40% tax liability in order to get 40% tax relief  

Whatever your income level, unless below the PA, drawing down an extra £3600 gross in order to pay £3600 gross back into a pension makes zero difference to your net income, makes zero difference to your total pension pot, all it does is "uncrystallises" £3600. Which may be worth doing if you don't have enough uncrystallised to use up any LSA remaining. But relies on the rules not being changed again (eg bring back the LTA etc). 

I have approx £10,600 tax free allowance left of £268,275 so I need £42,400 in my pot plus another £5,000 to get a third £10,000 fiddled small pot via Hargreaves Lansdown.

So need £48,000 in my pot to maximise tax free cash - 13 years of £3,600 gross. I am 60 so that will be easily done by 75 if I live that long and will crystallise £3,600 each year after taking my £10k small pot. I am retired and not intending to return to work.

Getting 40% relief is just a way of ensuring I maximise my 20% tax rate band income fully.

Yup using up the basic rate band may be a sensible decision, plus "uncrystallising" £3600 each year may also be if you have spare LSA/small pot. But it doesn't get you any more tax relief when you make the extra drawdown/contributions, because you're just getting relief on a liability you've created (ie extra £3600 taxable income, extra tax relief on £3600). Tax rate is irrelavent.  

incus432

On buying the fixed term annuity, we would have very much preferred to do this through an IFA but in the last week I have spent many hours searching for them, local and national, checking websites and finally approaching eight, but none were willing/able to act on an execution only basis and all insisted on a full financial review with associated high costs.  So have had to give up!  This does seem to be a gap

In the end we have used Retirement Line, a non advised specialist broker, who are clearly well established and do a high volume of business. The specialist was knowledgable, professional and helpful, and their annuity quotes were much better than those on the MoneyHelper site. Obviously they take a commission but he was specific that they could get better rates than if you approached the insurer direct (if they will even deal with you that is). They promise a £250 M&S voucher if you obtain a better quote direct,  He indicated the usual commission they would get is 1.8 to 2%* (for this pot 1.6 to 1.8k which seems fair for the work put in so far and in the future).

* Update - it was 1.5% in the event

 

dunstonh

On buying the fixed term annuity, we would have very much preferred to do this through an IFA but in the last week I have spent many hours searching for them, local and national, checking websites and finally approaching eight, but none were willing/able to act on an execution only basis and all insisted on a full financial review with associated high costs.  So have had to give up!  This does seem to be a gap

That surprises me in one respect but I suppose not on another.   There are probably about 4 or 5 in our area that wouldn't have any problem doing execution only.  Although none of them appear on the unbiased, vouchedfor or other similar directories.   Most of the small independent IFAs don't.    So, they are harder to find.   And the national/regionals don't really want to do that sort of thing.

He indicated the usual commission they would get is 1.8 to 2% (for this pot 1.6 to 1.8k which seems fair for the work put in so far and in the future).

For your fund value, that would be ballpark pricing in monetary terms with an execution-only transaction.  So, you probably wouldn't have saved much even if you did find one.  So, end result is good.  However, uncapped percentages can result in obscene amounts for large funds.

incus432

dunstonh said:

 Although none of them appear on the unbiased, vouchedfor or other similar directories.   Most of the small independent IFAs don't.    So, they are harder to find.  

As well as unbiased and vouchedfor I tried the search lists suggested in the thread, even tried Yell. 

dunstonh said:

For your fund value, that would be ballpark pricing in monetary terms with an execution-only transaction.  So, you probably wouldn't have saved much even if you did find one.  So, end result is good.  However, uncapped percentages can result in obscene amounts for large funds.

That's good to know. If it had been a larger pot I might have balked. And stuck to the drawdown route. Or tried to get my head round gilt ladders......

incus432

From one of the IFAs

"We would only provide annuity recommendations through a fully advised service, not execution only. This is because any formal advice to be given needs to be in accordance with FCA regulation that we know and understand our client's full circumstantial and financial position to ensure any advice is appropriate."

I mean this justification is surely hogwash, no? The FCA don't outlaw execution only and If the firm does this they are not giving formal advice. In other words they can obviously run their business how they want but just be honest ('no we have decided not to offer this') and don't blame the FCA

DRS1

dunstonh said:  However, uncapped percentages can result in obscene amounts for large funds.

A friend of mine who took out an annuity quite recently said there was a cap of £10000 on the commission.  I think he was using LV= not Retirement Line.  I did not ask so I do not know if that is the same across all these brokers.  But it may be some comfort for those with pots over £500,000.

FIREDreamer

DRS1 said:

dunstonh said:  However, uncapped percentages can result in obscene amounts for large funds.

A friend of mine who took out an annuity quite recently said there was a cap of £10000 on the commission.  I think he was using LV= not Retirement Line.  I did not ask so I do not know if that is the same across all these brokers.  But it may be some comfort for those with pots over £500,000.

As I stated earlier, I effectively paid 0.8% or £5k on just under £650k.