PURCHASED LIFE ANNUITIES - *WHY* MUST I PAY FAT FEES IN 'ADVICE' TO BE PERMITTED TO BUY SUCH ?

flyingchap

I'm of pension age now and have spent the last year reading up on all the Pension terrain, familiarising with all the Annuity types and so on and getting to grips with how it all works.  All fine EXCEPT FOR ONE REAL ODDITY: 

Annuities come in a range of types,  when purchased from a Pension pot (a pot of funds still in the tax-not-yet-paid  'stratosphere' pending use in retirement).  

Annuities ALSO come in a range of types when purchased from SAVINGS,  that is from tax-paid monies in a Bank. 

So far so similar. 

BUT:  while I am free to get quotes and if I wish,  entirely manage the buying of Annuities of many sorts  *from my pension pot*...    

...I am (told) I am NOT SO PERMITTED when it comes to Purchased Life Annuities UNLESS I have paid for MONSTROUSLY expensive 'advice'  from an IFA  (the-price-of a-good-used-sports-car-for-ten-minutes-advice    kind-of-monstrous).  

The ONLY 'mechanical' differences between the two (std life annuities & purchased life annuities) are that  

(a) they are taxed differently -- uncomplicated, and 

(b) the location of the monies pre-purchase. 

Yet in one situation I am trusted without "advice",  and one NOT.   

Does anyone know WHY ON EARTH this is ?    Given that it must affect millions of people ??

I will call the FCA if I can't find some wisdom on this.   

ONLY reason I could think of,  might be governmental  AML  worries,  which MIGHT be forgiveable,  but in which case we should be told this.   

And WHY is the 'advice'  so mind-bendingly expensive ?   My very experienced lawyer will sell me 30 minutes of high grade legal advice  for  £100.     An 'IFA' seems to think they're worth £2K-6K for the same kind of interval.

All wisdom appreciated.   Best wishes to all. 

 

dunstonh

...I am (told) I am NOT SO PERMITTED when it comes to Purchased Life Annuities UNLESS I have paid for MONSTROUSLY expensive 'advice'  from an IFA  (the-price-of a-good-used-sports-car-for-ten-minutes-advice    kind-of-monstrous).  

Wrong.

Providers are free to restrict their product to be sold via intermediaries or they can open up a distribution channel themselves.     There is no requirement for that intermediary to be advised, non-advised or whatever.   

Yet in one situation I am trusted without "advice",  and one NOT.   

Again, wrong.

Does anyone know WHY ON EARTH this is ?    Given that it must affect millions of people ??

As it is wrong, it isn't like that.      And how do you work out that it affects millions of people?
If you said it affected 5 people you may be closer to the mark seeing as how few people actually buy PLAs.

I will call the FCA if I can't find some wisdom on this.   

It will give someone at the FCA a laugh seeing as what you claim isn't true.

ONLY reason I could think of,  might be governmental  AML  worries,  which MIGHT be forgiveable,  but in which case we should be told this.   

We could play conspiracy bingo at this rate.....

And WHY is the 'advice'  so mind-bendingly expensive ?   My very experienced lawyer will sell me 30 minutes of high grade legal advice  for  £100.     An 'IFA' seems to think they're worth £2K-6K for the same kind of interval.

ROFL.   30 minutes for the advice process on a PLA.    If only that was the case.  Perhaps you should phone the FCA and tell them that you think the advice process should take 30 minutes.    

HappyHarry

30 minutes of high grade legal advice for £100? That is very inexpensive.

30 minutes of IFA work for £2000 to £6000? That would be incredibly expensive.

Maybe the work takes longer than 30 minutes?

Anyway, if the PLA provider needs an adviser to sign off the product, they can make those rules. There is no legal requirement to do so though.

Very few PLAs are purchased, and so the providers are unlikely to want the cost of training their staff to deal with them directly - it just wouldn't be cost effective. Far better for providers to pass the buck and the work to brokers - i.e. IFAs.

As a note, whilst a retail client can purchase annuities directly from a provider, they would usually get a far better annuity rate going via an IFA as the fees/commission tend to be less through an IFA than they are through the provider's own sales team.

** Edit - post crossed with dunstonh above.

Albermarle

OP,
The real problem is that PLAs are a very niche, very low volume  product, so inevitably attract more costs.

Marcon

flyingchap said:

All wisdom appreciated.   

 

Maybe check your facts before posting/getting so steamed up by what is in fact nothing worse than a misunderstanding on your part?

Dazed_and_C0nfused

Ibrahim5 said:

The OP has just asked a very genuine question which is a real problem.

But there was nothing in that question which said an IFA had provided the (incorrect) information.

I very much doubt anyone thinks 100% of IFA's are perfect but then what profession can genuinely claim that?

...I am (told) I am NOT SO PERMITTED when it comes to Purchased Life Annuities UNLESS I have paid for MONSTROUSLY expensive 'advice' from an IFA (the-price-of a-good-used-sports-car-for-ten-minutes-advice kind-of-monstrous).

flyingchap

Marcon said:

flyingchap said:

All wisdom appreciated.   

 

Maybe check your facts before posting/getting so steamed up by what is in fact nothing worse than a misunderstanding on your part?

Mr Marcon thanks for your thought.    It's not a question of "checking my facts"  -   I wasn't expressing  *an opinion* in my original post,   as the very offended Mr Dunston plainly thinks I was,   I was merely REPORTING the EXACT EXPERIENCE I have had in recent weeks,  trying hard to get sensible advice on this.   I've been talking to IFAs and other advisors for a long stretch on this issue -- and find it perverse.    If I for example pose this comparison, you can perhaps see what I mean: 

COMPARE:

A.    The 'Ordinary'  Life Annuity:  can be purchased from in-pension-pot untaxed funds,  NO advice needed,  providers happy to quote openly and direct (e.g. Canada Life will quote on the phone in 2 minutes).    No-one sees any concern there,  such products are sold in their thousands without problems.    

B.   (What I want):   The 'Ordinary' Purchased Life Annuity:  identical in every respect except (i) the source of funds and (ii) the (consequently) different tax treatment (which is self-evident and simple).   So WHY now,  cannot those same providers who sell [A.] daily,  just as easily sell  [B.]  to me without "Advice" ?    They are happy to, as long as I am "advised".    I remain open to understanding what secret it is that requires me to spend north of £2000 minumum to change me from  "not allowed to purchase"  to "allowed to purchase"  -- perhaps you can explain that.  Mr D certainly did not bother.    

Despite his brusque assuredness,  contrary to what Mr Dunston "instructs" me,  I am not  "wrong".  As I say this is NOT my opinion   -- it is simple what a series of annuity brokers and providers have TOLD ME CATEGORICALLY in recent weeks.   

If you or others could enlighten me in any way,  as I said, that will be much appreciated.   Just telling me I am "wrong" when I am only reporting precisely what the INDUSTRY ITSELF HAS TOLD me as recently as this afternoon,   is rather pointless.      

Thank you.  

flyingchap

HappyHarry said:

30 minutes of high grade legal advice for £100? That is very inexpensive.

30 minutes of IFA work for £2000 to £6000? That would be incredibly expensive.

Maybe the work takes longer than 30 minutes?

Anyway, if the PLA provider needs an adviser to sign off the product, they can make those rules. There is no legal requirement to do so though.

Very few PLAs are purchased, and so the providers are unlikely to want the cost of training their staff to deal with them directly - it just wouldn't be cost effective. Far better for providers to pass the buck and the work to brokers - i.e. IFAs.

As a note, whilst a retail client can purchase annuities directly from a provider, they would usually get a far better annuity rate going via an IFA as the fees/commission tend to be less through an IFA than they are through the provider's own sales team.

   Hello Harry and thanks for your input.  

 Just on those two price examples:

a.  The 30 minutes of legal advice for £100 ?  that's a firm in Basingstoke who did some property work for me,  during lockdown they moved to all remote and kicked off a new scheme of "half hour" slots - they in fact charged only £90 originally for the half hour.   I can introduce you to them if you like.    In business I've usually paid between £200 & £350 per hour for mid-range small company work, up to and including corporate finance.   My usual solicitor on that sort of work bills meetings in hours plus one decimal place (ie in increments of 6 minutes).    

b.  The £2000 - £6000  examples are figures quoted this week by UK IFAs from Unbiased who I have been speaking to.  They disagree with you and plainly DON'T think that's expensive.   I AGREE WITH YOU and think it is. 

Thanks very much.   All polite inputs are welcomed. 
  

flyingchap

HappyHarry said:

Very few PLAs are purchased, and so the providers are unlikely to want the cost of training their staff to deal with them directly - it just wouldn't be cost effective. Far better for providers to pass the buck and the work to brokers - i.e. IFAs.

As a note, whilst a retail client can purchase annuities directly from a provider, they would usually get a far better annuity rate going via an IFA as the fees/commission tend to be less through an IFA than they are through the provider's own sales team.

   Hi Again Harry.   
This quote of yours above is interesting -- I'm interested to hear that very few are purchased.  Is that consistent down the years ?    I am surprised - and hence wonder why - given that it would seem,  many people NEED PLAs:  surely, everyone who would like an annuity,  but have only tax-paid cash / savings and no pension pot,  is in that situation:  and that much include lots of people who had not built up a DC or DB pot -- that surely (for example) includes many women who gave up work to have children,  depending on their husband's income.   Anyone in that situation who for example loses their husband  before retirement - may (even if an insurance provided them with capital) be in exactly that situation.   I would have assumed it was therefore a biggish seller.     Can you say why it's not ?  Thanks.     

flyingchap

Albermarle said:

OP,
The real problem is that PLAs are a very niche, very low volume  product, so inevitably attract more costs.

    Mr Albermarle  thank you.   Thats interesting -  you're the second one to flag that point.   Please see my comment above (to Harry)  on the same point.    Can you comment on WHY you think PLA's are not a widely sold product,  given the scenario I mentioned  above ?    

Many thanks 

flyingchap

Dazed_and_C0nfused said:

Ibrahim5 said:

The OP has just asked a very genuine question which is a real problem.

But there was nothing in that question which said an IFA had provided the (incorrect) information.

I very much doubt anyone thinks 100% of IFA's are perfect but then what profession can genuinely claim that?

...I am (told) I am NOT SO PERMITTED when it comes to Purchased Life Annuities UNLESS I have paid for MONSTROUSLY expensive 'advice' from an IFA (the-price-of a-good-used-sports-car-for-ten-minutes-advice kind-of-monstrous).

   Hello Dazed & Confused  -  I should apologise for the slightly  'mr grumpy'  tone of my original but this is a forum of people discussing queries, concerns & aggravations -   the slightly leg-pulling tone I used above was intended to make people smile not frown.  I have evidently annoyed some IFAs.  Sorry. 

To answer your point though -- this WAS told to me by professionals in the field - this was from
either
(a)  IFAs (I have been speaking to a series of them to try to find  sub-£2000-to-start advice - I cannot find ANY yet); 
OR
(b)  other professionals in the zone such as annuity brokers (Retirementline  etc etc).     Hope that helps.

All wisdom appreciated