Do you need an IFA to purchase an annuity?

hotncold47

As dunstonh commented It does seem the Broker had headroom to adjust the rate and they make a point of matching any better offer in their spiel, makes me wish I had stated a higher figure, Doh!

The response to my enquiry through the Broker was nearly immediate with a telephone call so as mentioned by Bostonerimus you need to have a good understanding of what you require or the options you are interested in.

Another factor was waiting for the online IFA to respond which was nearly two weeks, the broker was just quicker.

dunstonh

This has echos of the recent issues with car loans. Variable commissions and preferential rates just sound like an opportunity to take advantage of the consumer. I assume there are some honest people in the business, but the cynical side of me says that there is plenty of room for abuse. I go back to removing the middle people getting the commissions and to have a more transparent market where the insurance companies sell at known fees and rates directly to the consumer.

Getting the insurance company to sell to public has historically been the most expensive distribution method.   So, that would be a retrograde step.

Additionally, FCA rules do not allow insurance companies to set commissions/fees on advised business as product manufacturers are not allowed to remunerate retailers.  The retailer has to be free to set their charge.

A competitive market is one that allows consumers to shop around to get a price they are happy with.  Not one where the insurer decides how much they will pay.

Yes for an identical annuity you should buy the one that gives you the largest payout amount after all fees and commissions have been paid. It might get a bit tricky to make the comparison if one has commissions taken out of the amount you are using to buy the annuity and another has fees you pay out of a separate amount.

Its not difficult to compare as the commission one will use the fund value multiplied by the lower annuity rate.  Whereas the advised one will use the fund value minus the fee (which is taken against the 75% element to not lower TFC) multiplied by the higher annuity rate.    Both methods will give you a bottom line figure.

Bostonerimus1

dunstonh said:

This has echos of the recent issues with car loans. Variable commissions and preferential rates just sound like an opportunity to take advantage of the consumer. I assume there are some honest people in the business, but the cynical side of me says that there is plenty of room for abuse. I go back to removing the middle people getting the commissions and to have a more transparent market where the insurance companies sell at known fees and rates directly to the consumer.

Getting the insurance company to sell to public has historically been the most expensive distribution method.   So, that would be a retrograde step.

"Historically" might be an important word in that sentence. There has been lots of innovations in the selling of investment funds that have driven down costs so perhaps something similar might happen in selling annuities. We shouldn't necessarily settle for the status quo.

Mr_Benn

Can I just ask , when you mention Annuity  'Brokers' , do you mean actual IFA backed websites, or just websites that do an online search for you (much like Moneyhelper does). ?, 

I do have an FA that I have spoken to briefly, and was recommended to me, but I like to get several alternatives to compare Annuity quotes. 

Thank you. 

Secret2ndAccount

An IFA has to ask you a lot of questions to build an overall financial picture. They will then determine if a product is suitable for you. They have a duty to look across the whole market, and offer you a deal which is well suited to you, even if it's not the best for them.
An FA does not have the same level of obligation. They might sell the products of as few as one company. 
A broker is a bit like buying from Amazon. You search on the web, then hit buy if you like what you see. They will then likely deal with you by phone/post. They have no obligation to determine if the product is suitable for you, or if you could get it cheaper somewhere else.
Each might have different commision from the provider, and charging structures for themselves. If you know what you want, look up the offers on Hargreaves Lansdown or RetiremntLine. See if your FA is willing to beat them. It will be a similar product eventually - all you will then care about is how much drops on to the doormat each month.
If you don't know what you want, then talking to the FA or an IFA might be helpful.