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

Albermarle

HappyHarry said:

flyingchap said:

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. 
  

I think the issue is that what you think is 30 minutes work will in reality take a lot longer.

If an adviser needs to sign something saying that they have given advice then they must give advice. This means understanding the clients current financial position, understanding the client's objectives, if a PLA is appropriate then sourcing the best rate available from the providers that offer them, writing up the recommendations, making the application and seeing it through to implementation.

I understand that this will sound like a ridiculous amount of work that needs to be done for an educated client who understands the market and is clear on what they require. However, adviser hands are tied by the regulator (the FCA) who, quite rightly, insist on the this level of work whenever advice is given. 

It would be far better to direct your frustration at the companies offering PLAs who are insisting on a client taking formal advice.  

I think of all the points made this is the key one.

If the providers of PLAs did not insist that customers have to have financial advice before they can buy a PLA, then that would solve the issue.

flyingchap

DaC  said:

Have you tried Canada Life?

For PLA's their website says you "should" take advice, not "must" take advice.

[ link removed else I'm not allowed to post - flying chap ]

NB.  I'm not recommending Canada Life, it's just an observation.

 THANK YOU  DaC   ---   I have talked to them before,  but not in recent weeks  --  the "must-shop-around" drive,   led me to the Brokers, and so it's them I've been talking to most recently - and from there, been pointed into this need-to-get-advice-first  thing and hence in circles.     

That's a great tip thanks I will go speak to them direct  /   and may as well try to talk direct to the others. 
(At least some "providers" seem to make it clear on their websites tho they don't want to hear from Joe Public, only advisors. ) 

Many thanks & best wishes

flyingchap

artyboy said:

A footnote is generic to all posts made and not personal to you. However it is certainly true that some posters have a tendency to take things more personally than others.

Incidentally, we get it, you're annoyed. But perhaps you could lay off the caps lock going forward?

          I'll do my best.     I really appreciate all positive inputs and some are coming now it seems.   

      Thanks  /   best regards

flyingchap

leosayer said:

OP, this forum is best when you provide personal finance problem that needs a solution. 

The main reason why financial service firms recommend you take advice and why IFAs charge so much is because of regulation implemented as a result of misselling in the past, often to clients who think they know best and often don't.

    Thanks LS   that is sound comment.     I realise the system is designed to protect us.    

xylophone

If in the end you find that advice is required, you could try

https://adviserbook.co.uk/

Tick "confirmed independent" and other options required when the menu comes up.

You mention that you have done extensive research on the web so may well have come across this

https://www.almondfinancial.co.uk/purchased-life-annuities/

Otherwise, the free half hour offered may be worth consideration?

Marcon

flyingchap said:

Marcon said:

flyingchap said:

All wisdom appreciated.   

 

'

Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!   '

Mr Marcon  -   I'd missed your  "footnote footnote" recommending that I 'Google'  for an answer to this (because for some reason it's omitted from the quote unless you add it manually back in).      Do you seriously,  think I have not been doing that ???     It's a silly comment on your part,  if you will pardon me.   Let me say why: 

I am not a child - I am a professional person well used to researching issues I'm working on.  I'd already SAID in my post,  that I've BEEN TALKING TO IFAs and BROKERS in the industry for weeks on this  -- hence the exasperation - I've read everything online I can find on this up to and inclulding the 2014 and 2020 FCA Reviews of the annuity sales process and their rule-changes (and two prosecutions of annuity providers for north of £20M each for mis-selling)  - and NONE of that has yet,  found me the answer to this still-extant conundrum:   

IF I am able to buy one type of annuity WITHOUT advice freely,   but only a very similar product  WITH ADVICE before I am allowed to,    when the differences are not complex  (the products are deeply simple in themselves)
then WHY is that advice SO expensive ?    I have not been able to get a quote for this advice below £2000: most IFA firms tell me their MINIMUM is either £2000 or  £2500  even when the advice is constrained to a single product quote.  Arguably the only "better value" I've had quoted was one IFA who has offered to advise on THREE such products (two other members of my family also need PLAs)  -  and their current offer for that is £4500.    (If you don't believe me I am happy to post redacted screencaps of that quote). 

I cam to a forum seeking BETTER advice than "try googling", thanks.   I thought the people in here would be earnest customers-with-past-experiences which could be helpful  --  all I seem to have found is a group of easily offended IFAs who can't take honest critique.    

I'm not an IFA, but as I'm able to answer your questions (as posed to Happy Harry), perhaps you'd be kind enough to read the post rather than just leaping to criticise me for having a footnote which everyone sees and appears automatically each time I post. You do seem rather keen on taking umbrage.

To refresh your memory, here's what you posted:

'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'  

Let me repeat my response here since you seem to have overlooked it in favour of just reading the footnote:

  You say 'many people NEED PLAs', but on what basis are you making that assertion? Not everyone would 'like an annuity' - you might, but a sample of one isn't representative!

Many moons ago (1980s), PLAs were very common. People would take maximum tax free cash from their defined benefit scheme and then buy a PLA with the tax free cash, taking advantage of annuity rates which were often as good as their DB scheme; the flexibility to buy an annuity which suited their needs (eg single life only rather than with spouse's benefit attached); and the advantageous tax treatment of a PLA.

 You've only got to look at the enthusiasm for so-called 'pension freedoms' (transferring from defined benefit schemes to defined contribution schemes), and the number of people opting for drawdown over annuities, to recognise that the days of choosing certainty over flexibility are well and truly over, at least for now. Being widowed doesn't change that; plenty of modern women are as capable of making financial decisions as their dearly departed husbands.

The world has moved on. Whether PLAs start to become more common to cater for things like care home fees ... time will tell.

dunstonh

 as the very offended Mr Dunston plainly thinks I was,

I wasn't offended. I just found your rant a bit bizarre.   It wasn't factually correct and you were ranting on a misconception. Responses often follow the tone set in the initial post.     

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.    

Correct.  However, Canada Life will factor a commission into the annuity rate which will often mean, especially with larger sums, that you have ended up with a more expensive option that using an IFA or a non-advised distributor.

Most of the lifetime annuity providers do not retail direct to public but require an intermediary (thnk of that as a shop).

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.    

The providers are free to decide if they sell direct or via a "shop".    They are not telling you that you need advice as you don't.   That is your misconception.  They are just saying you need to buy via an intermediary (the shop).   That "shop" can either be advised or non-advised.   

There is barely a commercial market for PLAs.  So, providers are unlikely to set up an in-house distribution and all the costs that go with that for a handful of plans.  So, the couple of PLA providers that still exist have decided that they will retail their product via an intermediary and let the intermediary suffer the costs of distribution.     The intermediary doesn't have to give advice to retail the product.    

The default action when you speak to a provider who does not retail the product directly, is to speak to an IFA.   That is not the only distribution method but it is the one they will tell you to use as it keeps them compliant.

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.   

You are wrong.    It is fact that there is no requirement for advice to be sought when buying a PLA.

You can buy a PLA non-advised or advised.  You mention annuity brokers.  They are non-advised typically (and often more expensive than advised).  So, how does that fit with your view that you are required to have advice?

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. 

There are not many IFAs left on unbiased.  Its mostly salesforce FAs nowadays.   Unbiased is not a good place to find an IFA.  Its a lead generation site for salesforces now.   Its so damned expensive for a listing.    Some firms have introduced two tier pricing where those that use lead generation sites to contact the adviser firm pay higher charges than those that go direct.

I cam to a forum seeking BETTER advice than "try googling", thanks.   I thought the people in here would be earnest customers-with-past-experiences which could be helpful  --  all I seem to have found is a group of easily offended IFAs who can't take honest critique.    

Lets look at what you did again.  Your first post was a rant which was a bit bizarre.  It wasn't structured as someone looking for genuine help.   Your later posts have improved in tone but your first one was a bit like crazy-old-man-shouting-at-pigeons style.    And the whole rant is based on a misunderstanding by you.  Misundertandings are common and this forum is good a resolving them but if you come here ranting first and don't appear to be looking for answers, then responses will reflect that.

RogerPensionGuy

To the opening poster, did you go forwards and buy a PLA?

I looked in to normal and purchased annuties about 9 months and decided to put them on ice.

But, I'm now doing a bit of housekeeping again and getting a PLA is back on my table.

One main reason I'm back looking is as pension pots between Mr & Mrs Roger are vastly different, getting a PLA in Mrs favour will be much more tax efficient than me.

I guess these PLAs are not well liked because they are purchesed with handy cash and many people like having liquid cash, just like many people like taking out 25% max TFLS on pensions activation even if commutation rate is poor, a bird in the hand comes to mind.

I think I understand PLAs okay and I feel happy enough using them. 

For information when I got a few normal and PLA quotes last April, I requested quotes for 100K, 200K & 400K and I was surprised to see all quotes were 99.99% pro-rata pound for pound, I was expecting slightly better rates as the actual purchase price ramped up. This got me thinking thst buying two or 3 of these products would allow each product to have different protections or guarantee periods or even put a spouce on if wanted.

I'm thinking PLAs could work good for people who downsize housing or just happen to have lots of liquid cash. 

It will be interesting to hear OP views and information on these PLAs.

Cheers Roger. 

incus432

I note many in the thread saying PLAs are a very niche and uncommonly sold product.  I wonder if the Reeves budget will change that.  With IHT thresholds frozen, rising house prices and now pension pots included many more are clearly looking how to reduce IHT liability and look into converting pots of money - whether in SIPPs or ISAs - into income, and may consider a PLA for that.  

I presume though that any death benefit or continuing payments under a guarantee period would still form part of the estate?

RogerPensionGuy

incus432 said:

I note many in the thread saying PLAs are a very niche and uncommonly sold product.  I wonder if the Reeves budget will change that.  With IHT thresholds frozen, rising house prices and now pension pots included many more are clearly looking how to reduce IHT liability and look into converting pots of money - whether in SIPPs or ISAs - into income, and may consider a PLA for that.  

I presume though that any death benefit or continuing payments under a guarantee period would still form part of the estate?

I am guessing with the likelihood that the SIPP/IHT rules will change soon, the risk/reward, die early/late, feeling of overall value will see annuities and PLAs getting used more and more from now on.