Considering an annuity with another provider. Is an IFA really needed to do this?

grn99

Having build up a pensions pot over the years with Clerical Medical (now part of Scottish Widows) and I am now at the point of needing to start a pension.

I have spoken to an IFA who is pushing down a phased drawdown route via another provider and a whole series of fairly involved investments on a single platform they seem to use for everything they propose, be it the pension, ISAs, onshore bonds etc.... to wring out enough money to meet our projected annual costs! But with plenty of charges for setting up and ongoing management, which eats into the pot at around 2.32% - 1.30% charges for initial work and .75% for the ongoing drawdown, plus platform, wrapper and investment charges etc. I'd be paying more in charges in the first few years than I get! Extremely tax efficient, but seems cumbersome and expensive.

Having looked into all this again over the weekend, I'm sure that I can get to the same end game via the old fashioned annuity route via Standard Life or maybe Scottish Widows. My plan is to see if either provider will quote me with the various protection options I want (I have used the moneyhelper annity Quote tool); but unless I'm reading too much into the Standard's website "guidance", they seem to want an IFA involved to do anything for a new customer...and that's my question, is that the case and is this a regulation thing. I cannot see why I should pay yet more fees to do what is fairly straightforward purchasing decision? Any experience, advice or thoughts on whether I'm going to have problems are welcome...

Linton

Why not ask the IFA to investigate annuities along with the other options?  If you go direct to the annuity provider you will be paying for the provider's customer-facing staff but this will be covered by a reduced annuity rate rather than an explicit charge. An IFA should be able to get a better deal as it costs the provider less but will make a charge.  The end result may not be very different.

Albermarle

Linton said:

Why not ask the IFA to investigate annuities along with the other options?  If you go direct to the annuity provider you will be paying for the provider's customer-facing staff but this will be covered by a reduced annuity rate rather than an explicit charge. An IFA should be able to get a better deal as it costs the provider less but will make a charge.  The end result may not be very different.

I agree with these comments, but like the OP I have also noticed the Standard Life policy on offering annuities.
If you are an existing customer, you can talk directly with them, even if you only have a small pension with them and maybe be generally clueless about annuities.
However if you are not an existing customer, you have to go via an IFA.
I don't follow the logic, especially AFAIK , SL annuities are available through brokers ( who are not advisors). 

dunstonh

I have spoken to an IFA who is pushing down a phased drawdown route

IFAs take instructions from you.    Not the other way around.    If you don't want the risk or don't see any benefit in the drawdown options and annuity is your preference then the IFA can do the annuity.

Having looked into all this again over the weekend, I'm sure that I can get to the same end game via the old fashioned annuity route via Standard Life or maybe Scottish Widows. 

Its not old fashioned.   Annuities are back in a window where they are viable again. Chances are your IFA is doing similar volumes to other IFAs at the moment.

My plan is to see if either provider will quote me with the various protection options I want (I have used the moneyhelper annity Quote tool); but unless I'm reading too much into the Standard's website "guidance", they seem to want an IFA involved to do anything for a new customer...and that's my question, is that the case and is this a regulation thing. I cannot see why I should pay yet more fees to do what is fairly straightforward purchasing decision? 

Why do you think that paying fees makes it more expensive?

Most providers do not retail directly to consumers.  Those that do factor commission into the annuity rate, which gives a lower annuity rate than an IFA.  Same with direct-to-consumer quote portals.    For smaller values, those direct sites would be cheaper.  For larger values, the IFA would be cheaper.

Retailers add a margin, whether that retailer is an IFA, direct to consumer or a non-advised website service.   Bypassing an IFA can actually cost more.     e.g. an IFA charging a £1500 fee vs a commission-based non-advice service with £2500 commission.   

grn99

Thanks everyone.

Ok, it sounds like I’ll have to do this via the IFA, and I do accept there’s hidden charges even when buying direct from a provider.

 I’ll just have to see how much he’ll charge to do this rather than long list of charges he would’ve received for the life of the complex drawdown solution.

Not sure whether to invite alternative recommendations or just perform an execution only fee (presumably) to allow me to transfer the fund into the annuity provider that came top in the various quotes I’ve been obtaining via money helper?

dunstonh

Ok, it sounds like I’ll have to do this via the IFA, and I do accept there’s hidden charges even when buying direct from a provider.

There are no hidden charges.    Commission must be disclosed on the illustration if you use a non-advised distribution channel.  

 I’ll just have to see how much he’ll charge to do this rather than long list of charges he would’ve received for the life of the complex drawdown solution.

The initial should be exactly the same.  As the cost of advice is the same whether you buy an annuity or go into drawdown.    

transfer the fund into the annuity provider that came top in the various quotes I’ve been obtaining via money helper?

The IFA won't use MoneyHelper as it's not reliable enough for an IFA to use.    IIRC, the snapshots are not updated as frequently as the quote portals used by IFAs and website distributors.    If your application is clean health and you apply during a stable period then it may not make any difference.   However, in a volatile period or if you have health conditions, then it can do.

DRS1

For that one what it is worth last year I took an annuity the two best quotes were SL and SW but as the pensions weren't with either of them they wouldn't talk to me direct.  So I went through a broker.  This year I am taking an annuity from an SW pension and SW will talk to me direct about that one.  Their quote also says they are the best one.

So you may be able to talk direct to SW about your pension and taking an annuity from it without involving an IFA or a broker.

But be warned that built into the direct quote is 1% commission.  If your IFA beats that then you would be better going via the IFA.

grn99

DRS1 said:

For that one what it is worth last year I took an annuity the two best quotes were SL and SW but as the pensions weren't with either of them they wouldn't talk to me direct.  So I went through a broker.  This year I am taking an annuity from an SW pension and SW will talk to me direct about that one.  Their quote also says they are the best one.

So you may be able to talk direct to SW about your pension and taking an annuity from it without involving an IFA or a broker.

But be warned that built into the direct quote is 1% commission.  If your IFA beats that then you would be better going via the IFA.

Thanks - that’s very interesting and useful.
Yes  my IFA is  also 1% minimum initial.

FIREDreamer

I used Hargreaves Lansdown for both my annuities (2023 and 2025). They charged 0.8% of the purchase price (capped at £5,000 which didn’t bite) each time.

dunstonh

 Their quote also says they are the best one.

Ignore that.  It's broken.  It uses the MoneyHelper tables.   You often see that on quotes that are not the best.

You need to see the whole of market prices to see for yourself.

grn99

dunstonh said:

 Their quote also says they are the best one.

Ignore that.  It's broken.  It uses the MoneyHelper tables.   You often see that on quotes that are not the best.

You need to see the whole of market prices to see for yourself.

Thanks. I assume  the whole of market prices only available to IFA’s??