Annuity Purchase Cost

FIREDreamer

Hargreaves Lansdown charged me 0.8% to buy an annuity (actually paid by the insurer).

I didn’t have anything to compare with until this letter was posted to an address I left nearly 20 years ago (hand delivered by the people we sold the house to) …

Wow 2.25%.

How much would an IFA charge for this service?

dunstonh

How much would an IFA charge for this service?

Around £1000-£2500.

Hargreaves Lansdown charged me 0.8% to buy an annuity (actually paid by the insurer).

No it wasn't. You paid it.  

HL's non-advised service, like other non-advised, uses the commission-based annuity rate.   This is lower than the fee based annuity rate which has no commission factored into it.    

FIREDreamer

dunstonh said:

How much would an IFA charge for this service?

Around £1000-£2500.

Hargreaves Lansdown charged me 0.8% to buy an annuity (actually paid by the insurer).

No it wasn't. You paid it.  

HL's non-advised service, like other non-advised, uses the commission-based annuity rate.   This is lower than the fee based annuity rate which has no commission factored into it.    

Thank you.

i went with Just who seems to be different all the other providers. Others seem to change their annuity basis every couple of weeks whereas Just gives a different quote every day. I was fortunate because the funds arrived at Just in mid October which seems to have been the sweet spot for RPI annuities.

Using an IFA might have taken longer and mean that my annuity would have been lower due to rates going down.

Perhaps I was lucky that I went with Hargreaves - more luck than judgement anyway.



I have rerun the annuity now, We are 3 months older and rates have dropped significantly though Just doesn’t give a quote this time.

dunstonh

Using an IFA might have taken longer and mean that my annuity would have been lower due to rates going down.

Although, it may have been higher?  Did you get the computer rate or did HL ring Just to get the uplifted rate?

FIREDreamer

dunstonh said:

Using an IFA might have taken longer and mean that my annuity would have been lower due to rates going down.

Although, it may have been higher?  Did you get the computer rate or did HL ring Just to get the uplifted rate?

The computer rate off the website was something like £24,100 which I was happy with. It took ages for the funds to go to Just as it kept bouncing back (return date matched the send date so no interest lost) as Hargreaves got the reference number wrong twice. When it did go through I found that the annuity had gone up a bit so I was happy with that.

As rates have come down since then I think the timing was good and if I had gone with an IFA it could have taken longer and the rate might more likely to been lower as a result.

I was able to answer health questions on the web site but whilst it did impact all the other providers it made no difference with Just (same rate with or without health questions - i have a login with health declaration and another without to do a comparison) who were higher anyway.

I might use an IFA if I buy an annuity with the rest of the pot in the future though. Annuity rates might have stabilised by then and we would also be older.

FIREDreamer

Just quotes this morning, much higher than its competitors, slightly lower than what I got in October.

westv

Just out of curiosity I also ran a quote on the HL site this morning. 
Just was also the highest for me at £ 11,691 (reflecting my smaller pot). The lowest £10,117 (also Aviva).
And I'm almost 61 and my wife almost 54.

Qyburn

dunstonh said:

How much would an IFA charge for this service?

Around £1000-£2500. 

In that scenario can the IFA fee come from the pension fund, or is it billed separately?

I assume in HL's case the 0.8% comes from the fund indirectly in some way, noting that 0.8% of £645k is over twice as much.

dunstonh

In that scenario can the IFA fee come from the pension fund, or is it billed separately?

Either.  It can also be taken after TFC taken in many cases.

I assume in HL's case the 0.8% comes from the fund indirectly in some way, noting that 0.8% of £645k is over twice as much.

Its a bit like 4x5 and 5x4.
If both the commission and the fee are the same then the end annuity rate will be virtually the same.
With a fee, the fund value is reduced by the fee but the nil commission annuity rate is applied.
With commission, the fund value is not reduced by the commission but a lower annuity rate is applied.

On a £645k fund, it is an absolute no-brainer to use an IFA.  Plus, with Just, the IFA would have got the computer rate further enhanced by speaking to their Just account manager (never once have they failed to increase it. Sometimes just a little.  Sometimes surprisingly a lot)

FIREDreamer

dunstonh said:

In that scenario can the IFA fee come from the pension fund, or is it billed separately?

Either.  It can also be taken after TFC taken in many cases.

I assume in HL's case the 0.8% comes from the fund indirectly in some way, noting that 0.8% of £645k is over twice as much.

Its a bit like 4x5 and 5x4.
If both the commission and the fee are the same then the end annuity rate will be virtually the same.
With a fee, the fund value is reduced by the fee but the nil commission annuity rate is applied.
With commission, the fund value is not reduced by the commission but a lower annuity rate is applied.

On a £645k fund, it is an absolute no-brainer to use an IFA.  Plus, with Just, the IFA would have got the computer rate further enhanced by speaking to their Just account manager (never once have they failed to increase it. Sometimes just a little.  Sometimes surprisingly a lot)

Could an IFA do this for an existing Just customer if I wanted to buy another annuity at some point?

dunstonh

FIREDreamer said:

dunstonh said:

In that scenario can the IFA fee come from the pension fund, or is it billed separately?

Either.  It can also be taken after TFC taken in many cases.

I assume in HL's case the 0.8% comes from the fund indirectly in some way, noting that 0.8% of £645k is over twice as much.

Its a bit like 4x5 and 5x4.
If both the commission and the fee are the same then the end annuity rate will be virtually the same.
With a fee, the fund value is reduced by the fee but the nil commission annuity rate is applied.
With commission, the fund value is not reduced by the commission but a lower annuity rate is applied.

On a £645k fund, it is an absolute no-brainer to use an IFA.  Plus, with Just, the IFA would have got the computer rate further enhanced by speaking to their Just account manager (never once have they failed to increase it. Sometimes just a little.  Sometimes surprisingly a lot)

Could an IFA do this for an existing Just customer if I wanted to buy another annuity at some point?

Yes.  Each annuity purchase is standalone.