Buying _one_ annuity with multiple private pension pots

dermotological

Is it possible to purchase one single lifetime annuity from the proceeds of multiple private pension funds split across multiple pension providers?

Also, am I _legally required_ to engage an IFA to perform this transaction?

I am coming up to 55 and want to take my private pensions. As far as I am aware, they are simple bog-standard UK personal pension funds - nothing esoteric or elaborate - and I would like the process to be along the lines of:

• Get a quote from MoneyHelper.org to pick the best annuity provider.
• Contact the annnuity provider and say:
  • Hi - I want to buy an annuity from you
  • There will be approximately £X,000 coming your way from N funds.
  • Please give me a reference number for me to give to the N funds.
• Contact each fund.
• Tell them to "close" the account and send the funds to the annuity provider with reference number.
• Start taking my annuity when all funds have been delivered to the annuity provider.
  

Can it possibly be made that simple?

On the IFA front, when my wife took an annuity, certain providers _point blank refused_ to deal with her on a direct basis, forcing us to spend 1% of her fund on a IFA to coordinate the transaction. 

My fund pot is significantly larger, and such a fee would be a very tough pill to swallow.

Thank you

tacpot12

It should be possible to negotiate on the IFA's fee. You can offer them the sum of money you think would be reasonable. I would offer to pay them directly, so that no deduction is made from your fund.

I think it will be better and easier to find an IFA who will do the work (so that you have the full choice of all annuity providers) rather find an annuity company that will let you go direct. 

NoMore

Could you not combine all the pensions into a single one first, usually no cost to do this. 

dunstonh

Is it possible to purchase one single lifetime annuity from the proceeds of multiple private pension funds split across multiple pension providers?

In most cases yes, in rarer cases, no 
You would use the IVPPP method rather than the OMO method.

Also, am I _legally required_ to engage an IFA to perform this transaction?

No. Although it can often be best to do so.

• Get a quote from MoneyHelper.org to pick the best annuity provider.

That gets you a ballpark figure but they are not reliable enough to rely on solely.  They use assumptions and do not factor in commercial distribution channel terms.

• Contact the annnuity provider and say:

• Hi - I want to buy an annuity from you

• There will be approximately £X,000 coming your way from N funds.

• Please give me a reference number for me to give to the N funds.

That isn't how it works.  Plus you are assuming the annuity provider has a distribution direct to client and you are assuming the commission is lower than alternative distribution methods (it usually isn't).

• Contact each fund.

• Tell them to "close" the account and send the funds to the annuity provider with reference number.

Again, not how it works.   
The ceding scheme does not send the money.  The receiving scheme requests the money.

On the IFA front, when my wife took an annuity, certain providers _point blank refused_ to deal with her on a direct basis, forcing us to spend 1% of her fund on a IFA to coordinate the transaction. 

Maybe you should go back to that IFA as 1% is not bad (subject to fund size).    Indeed, most of the providers that deal direct with the consumer take more than 1%.

My fund pot is significantly larger, and such a fee would be a very tough pill to swallow.

So, why are you looking at an option that is likely to cost you more?

Most IFAs will cap or taper their charge with larger values.  So, it could be lower than 1%.

Marcon

dermotological said:

Is it possible to purchase one single lifetime annuity from the proceeds of multiple private pension funds split across multiple pension providers?

Also, am I _legally required_ to engage an IFA to perform this transaction?

I am coming up to 55 and want to take my private pensions. As far as I am aware, they are simple bog-standard UK personal pension funds - nothing esoteric or elaborate - and I would like the process to be along the lines of:

• Get a quote from MoneyHelper.org to pick the best annuity provider.
• Contact the annnuity provider and say:
  • Hi - I want to buy an annuity from you
  • There will be approximately £X,000 coming your way from N funds.
  • Please give me a reference number for me to give to the N funds.
• Contact each fund.
• Tell them to "close" the account and send the funds to the annuity provider with reference number.
• Start taking my annuity when all funds have been delivered to the annuity provider.
  

Can it possibly be made that simple?

On the IFA front, when my wife took an annuity, certain providers _point blank refused_ to deal with her on a direct basis, forcing us to spend 1% of her fund on a IFA to coordinate the transaction. 

My fund pot is significantly larger, and such a fee would be a very tough pill to swallow.

Thank you

But if it gets you a much better deal, then it could be a sugar coated pill (albeit in disguise!)?

dermotological

Marcon said:
But if it gets you a much better deal, then it could be a sugar coated pill (albeit in disguise!)?

True, but it would have to be at least 1.01% better than the Open Market Option.

OK - real numbers. My pot is £300k. A 1% fee is £3000 to the IFA. Nice work if you can get it.

Approx annuity rates for my circumstances are £5900 / £100k, so £1475 per month.  Reducing my bucket to £297k costs £14.75 per month, for 30 years, so £5310. That stings.

The IFA would have to find a deal netting _at least_ 1.01% better than anything I could find myself before I don't lose out.

Albermarle

dermotological said:

Marcon said:
But if it gets you a much better deal, then it could be a sugar coated pill (albeit in disguise!)?

True, but it would have to be at least 1.01% better than the Open Market Option.

OK - real numbers. My pot is £300k. A 1% fee is £3000 to the IFA. Nice work if you can get it.

Approx annuity rates for my circumstances are £5900 / £100k, so £1475 per month.  Reducing my bucket to £297k costs £14.75 per month, for 30 years, so £5310. That stings.

The IFA would have to find a deal netting _at least_ 1.01% better than anything I could find myself before I don't lose out.

Note that an IFA will have access to annuity providers that do not deal direct with the public.
In theory at least you should get at least a 1% better deal. 

dermotological

dunstonh said:
Again, not how it works.  The ceding scheme does not send the money.  The receiving scheme requests the money. 

OK - the same only backwards. I'd still need to contact my fund providers to authorise the delivery of funds to the annuity provider. I can do that.

Most IFAs will cap or taper their charge with larger values.  So, it could be lower than 1%.

Good to know. I will ask.

So, why are you looking at an option that is likely to cost you more?

I didn't know that it _would_ cost me more - it's why I'm asking :-)

In my circumstances, that 1% IFA fee would end up costing me £5300 over 30 years in reduced annuity, assuming the IFA haggled the same deal as the open market option. That's a huge consequence.

Also, am I _legally required_ to engage an IFA to perform this transaction?
No. Although it can often be best to do so.

Good to know. Why might have the provider refused to engage directly?


Thank you

dermotological

Albermarle said:
Note that an IFA will have access to annuity providers that do not deal direct with the public.

In theory at least you should get at least a 1% better deal. 

Interesting - the one we went with didn't. It was the same list as the moneyhelper.org website, with just 4 or 5 providers, and the quotes were _very_ similar.

EDIT: it was basically the same list as this from Which and Unbiased:

Scottish Widows

Standard Life

Legal & General

Aviva

Canada Life

Just

Sources: 
https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/annuities/annuity-rates-aQGfH6W5n2rm

https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/5-of-the-best-annuity-providers-in-the-uk

dunstonh

True, but it would have to be at least 1.01% better than the Open Market Option.

Couple of things you are missing there.
1)  IFAs get the nil commission annuity rate.  
2) buying direct gets a lower annuity rate as it factors in the commission being paid.

Broadly speaking,  if the commission was 1% and the IFA fee was 1% then the annuity amount in monetary terms will be in the same ballpark.

OK - real numbers. My pot is £300k. A 1% fee is £3000 to the IFA. Nice work if you can get it.

Remember that the 1% fee is not pure profit.    
Also, if you buy direct, then figures closer to 2% are not uncommon.  They do even less work.

The IFA would have to find a deal netting _at least_ 1.01% better than anything I could find myself before I don't lose out.

As the IFA gets a higher annuity rate by default, it shouldn't be that difficult.

OK - the same only backwards. I'd still need to contact my fund providers to authorise the delivery of funds to the annuity provider. I can do that.

You don't need to notify the ceding schemes.

In my circumstances, that 1% IFA fee would end up costing me £5300 over 30 years in reduced annuity, assuming the IFA haggled the same deal as the open market option. That's a huge consequence.

Now calculate the reduced annuity on a 2% commission for going direct?  (commission rates vary and could be higher or lower)

Why might have the provider refused to engage directly?

Regulatory costs and margins.      An annuity provider is a manufacturer.   So,they have to comply with FCA rules regarding manufacturing of a product.  They don't need to comply with distribution rules unless they decide to become a distributor.   That would involve further compliance requirements (more cost), more staff and open them up to increased levies to the FCA, FOS, FSCS etc   (levies are based on a percentage of turnover in an area. if you do not transact in that area, there is no levies applied).

So, unless they are going to get good volume, its often not worth suffering those costs and liability when you have a healthy distribution channel via intermediaries (advised or non-advised).

DRS1

For what it is worth I tried doing what you suggest in your first post in April last year.  The top two companies on my list of quotes were Standard Life and Scottish Widows.  Neither would talk to me direct.
I ended up using Retirement Line and their commission was(I think) more than 1%
You could try getting a quote from Hargreaves Lansdown.  They may give you a different result (Just came top for me with them).
I don't think there are other annuity companies hanging around waiting for an IFA to contact them so that list of yours is pretty much it.
One thing I did not know until I did it is the difference between IVPP and OMO.  With IVPP 100% of your pot is transferred to the annuity provider who then pays you any tax free lump sum and puts the annuity into payment.  With OMO the current pension provider pays you the 25% tax free lump sum and then pays the balance to the annuity provider.  Since it is the annuity provider who pays the commission to the likes of Retirement Line I think that may save you a bit of commission - not sure if the same applies to an IFA.
Another thing to consider where you have multiple pensions is that most annuity providers wait until they have all the money before they start the annuity but some will start paying in bits as and when the money comes in.  That may help if you think any delays may occur with any of the transfers.
People do say check the pension provider uses Origo - the transfer happens more quickly.  In my case the quickest transfer was the one who used old fashioned paper forms.
By the way I am not sure going direct (even if possible) saves the commission.  I think that is built into the quotes you get.  The advantage of the IFA is they can get the commission adjusted or stripped out depending on how they structure their charges.  Would I have been better off using an IFA? Quite likely.  If you search on here there are plenty of threads about buying annuities and using IFAs (or not).