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Buying an annuity direct

cricketfanatic
Posts: 12 Forumite

Hi,
I'm ready to buy an an annuity.
I used a comparison website, so I know which provider I prefer.
Having emailed the provider to ask if I can buy one direct, they've redirected me to their IFA providers. I read somewhere that annuity providers are unlike to deal direct, and my options are either to use a broker or IFA, either of which may cost a fair amount of money. Given that I've done a lot of research, am confident in my own planning and calculations, and don't want advice, I'd like to avoid this if possible. Has anyone got any experience of buying direct, or can provide any advice on broker v IFA please? If I can't go direct, I'm looking for the cheaper of the two options
Thanks for any help.
For context: I have c180k to use for the annuity. I've done a lot of research and comparisons on things like taking a lump sum, index- linking, protection, tax implications etc, so now know what I want. I have a telephone apt with the Govt free pension advice service who will hopefully verify my plan. I've been retired for four years (living off savings) so have a good idea of my income requirements, have some final salary pensions kicking in over the next five years (which will make up about half my monthly income) and also have a fairly large savings pot as a buffer if required during my retirement.
I'm ready to buy an an annuity.
I used a comparison website, so I know which provider I prefer.
Having emailed the provider to ask if I can buy one direct, they've redirected me to their IFA providers. I read somewhere that annuity providers are unlike to deal direct, and my options are either to use a broker or IFA, either of which may cost a fair amount of money. Given that I've done a lot of research, am confident in my own planning and calculations, and don't want advice, I'd like to avoid this if possible. Has anyone got any experience of buying direct, or can provide any advice on broker v IFA please? If I can't go direct, I'm looking for the cheaper of the two options
Thanks for any help.
For context: I have c180k to use for the annuity. I've done a lot of research and comparisons on things like taking a lump sum, index- linking, protection, tax implications etc, so now know what I want. I have a telephone apt with the Govt free pension advice service who will hopefully verify my plan. I've been retired for four years (living off savings) so have a good idea of my income requirements, have some final salary pensions kicking in over the next five years (which will make up about half my monthly income) and also have a fairly large savings pot as a buffer if required during my retirement.
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Comments
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See these 2 recent threads with discussion on this:
1 -
Phone up a local IFA, tell them what you want and find out the fees. Might be lower than you think.
Lots of online providers too - give them a try e.g. https://www.hl.co.uk/retirement/annuities/buying1 -
You might just want to check on whether an IFA could get you a better deal.
https://adviserbook.co.uk/
Tick "confirmed independent" and other requirements when the menu comes up.1 -
Having emailed the provider to ask if I can buy one direct, they've redirected me to their IFA providers.None of the annuity providers have any IFAs on their books. Have they just referred you to a list of IFAs?I read somewhere that annuity providers are unlike to deal direct, and my options are either to use a broker or IFA, either of which may cost a fair amount of money.If you go to a non-advised broker, they will give you the commission based annuity rate which is lower than the nil commission annuity rate used by IFAs. However, IFAs will charge a fee.I'm looking for the cheaper of the two optionsShouldn't you be looking for the better annuity rate rather than the option that pays the least to the firm that arranges it?I have a telephone apt with the Govt free pension advice service who will hopefully verify my plan.No they won't. They do not provide advice and will not make any recommendations or suitability assessments. its guidance only on a generic basis to make you aware of the main options.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.1 -
Thanks everyone, some useful links and things to consider. I'm concluding that a broker may give 'lower' annuity rates (because commission is embedded in them), whereas an IFA could give better annuity rates, but charge a one-off fee on top. So it's a matter of seeing which gives the best income to me overall, taking these into account. I'll get some IFA quotes and see what it is looking like.1
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I went with L&G at Christmas for a small annuity, and they were giving the best rate by far at the time. I checked on HL to compare and went to L&G direct. I contacted an IFA who I used before to see if they could give me a better rate, but they couldn't fit me in for 2 months.
If I could have got a better rate I am not sure but I was only looking at £60k so not a large amount for an IFA to be interested in1 -
cricketfanatic said:Thanks everyone, some useful links and things to consider. I'm concluding that a broker may give 'lower' annuity rates (because commission is embedded in them), whereas an IFA could give better annuity rates, but charge a one-off fee on top. So it's a matter of seeing which gives the best income to me overall, taking these into account. I'll get some IFA quotes and see what it is looking like.
So, you get the following comparison
IFA: fund value minus fee multiplied by higher annuity rate
non-advised: fund value multiplied by lower annuity rate.
This generally results in lower fund values being better via non-advised and higher values being better via an IFA.
However, its not as simple as that. I did an annuity on a smallish value and our fee was higher than a well known website commission but we still got a better annuity rate. I put that down to filling out the medical details better as I needed to prompt the client to get more information (the direct service didnt do that) and the increased information led to a better annuity rate. Plus, the provider that came out top gives better terms to IFAs because the quality of information they get is better). So, despite the fee being a few hundred more than the commission, it still gave more.
Ideally, you want an IFA that has a cap on their fee that equates to a relative low percentage or a fixed fee that does the same. The non-advised methods tend to have no cap and large funds can result in a large monetary amount of commission.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.2 -
Also if using a IFA it's worth doing a quick check for ombudsman decisions against them:
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