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

DRS1

I am not sure who your SIPP platform providers are but they are probably not in the business of paying annuities.  Yes HL could get you an annuity quote but that would be from one of the insurance companies.

If you mean would they let you draw down at a rate better than the best annuity then I am sure they would but they wouldn't guarantee that you wouldn't run out of money.

Albermarle

DRS1 said:

RogerPensionGuy said:

This thread has so much great information and just though I would try eeking out any more on this subject without starting a new thread. 

Of lately(the last few years) I was steering away from annuities and PLAs, but they always remain an option.

Looking at annuities now they feel a little more attractive as SIPPs & GIAs have rolled up very nicely and annuity rates are going up, plus I'm getting older and the general quotes I'm seeing now are very plesent reading.

I'm trying to guess if annuity rates are likely to increase, stay level or reduce in this next period, say 3 months to one year and is there any early signs helping me decide.

I guess I'm trying to catch a rising knife or the bubble before it bursts if you see what I mean. 

Do annuity rates change daily, weekly, monthly or can they just move more freely.

Any information or views most welcome. 

Link below for supplementary information that is getting my attention. 

***

https://www.standardlife.co.uk/about/press-releases/annuity-rates-surge#:~:text=id,9.20%

Well it depends on where gilts prices go and no-one can safely predict that.

But why don't you follow @FIREDreamer's lead and get multiple quotes.  I think a quote is guaranteed for 30 days so if in that 30 day window you see the rates tick down (and think they will carry on down - don't ask me how you decide that but maybe watch for a week or two) then you can grab the highest quote which still is in the 30 day window.

Of course it is impossible to predict.

However the UK fiscal position is not great ( due to all sorts of reasons) so it seems unlikely gilt yields will come down unilaterally. On the other hand RR is acutely aware of the bond markets and I think she will make as sure as she can that the budget does not upset them, even if it means some unpopular announcements.
So some stability with gilts and annuity rates is likely unless global rates start to ease a bit.
Just a guess though !

In the link from SL, they say they are seeing an uptick in annuity take up due to the impending IHT changes.
I have been thinking about this but am thinking if I do not really need the income from an annuity and just save it, then I have not achieved anything with respect to IHT anyway.
If I need the money I could just draw it down from the pot, which over time would have the same result of reducing my assets as an annuity anyway.
In the end it seems the only really workable strategy to avoid IHT , is to spend more or gift more.

PhoneBook

westv said:

Where does it show the commission on the HL annuity quotes?

After you've run the HL annuity finder it will list offers from various providers, select Apply for one of them and you'll be taken to a page listing various .pdf documents to do with that quote, select Your Annuity Quote and in that document you'll see a statement of the commission to be paid to HL.

PhoneBook

DRS1 said:

PhoneBook said:

I've been exploring annuities using the Hargreaves Lansdown annuity quotation tool. On transferring around £150,000 from my SIPP into an annuity it would see HL be paid a £4,800 commission. Ouch! If I go down the annuity route I'll certainly be looking for a cost-effective way to purchase it. £4,800!!!! What?!?!?

If you play around with the numbers (eg up the 150 to 250 or 500) does the £4800 change?

And does it change according to the annuity provider?  It is the provider who pays the commission.

But the provider must surely be using "my" money to pay the commission, taken out before they calculate the payments, where else would it come from?

RogerPensionGuy

Reference DRS1 post above, I have checked my SIPP providers and one says they provide annuities, but will advise at quote if others pay more income, the other providers appear to say they will link me up to a buying service whereby I guessing that SIPP provider gets a kickback.

Reference Albermarle post above, I also guess gilts will be sticky for a period so I don't expect annuity rates to slip down too quickly, but anythink possible.

***

I asked various internet AI outlets the following question, they provided nice information, answers/information was a bit long, so suggest anyone interested just ask the same or similar question. 

"I am wondering if buying an annuity that is RPI linked or a 5% index is the best option, trying to view historically the best option"

***

I think the feeling about buying an annuity being RPI or a fixed % linked is a bit like that old chestnut of sequencing, sequence risk and feeling lucky or not lucky.

My gutt feeling is there's too much government debts on the books and a period of higher inflation maybe a fair bet for income security and the RPI feels like a reasonable way to go.

Maybe get 2 annuities, one RPI & one a fixed % index. 

dunstonh

PhoneBook said:

DRS1 said:

PhoneBook said:

I've been exploring annuities using the Hargreaves Lansdown annuity quotation tool. On transferring around £150,000 from my SIPP into an annuity it would see HL be paid a £4,800 commission. Ouch! If I go down the annuity route I'll certainly be looking for a cost-effective way to purchase it. £4,800!!!! What?!?!?

If you play around with the numbers (eg up the 150 to 250 or 500) does the £4800 change?

And does it change according to the annuity provider?  It is the provider who pays the commission.

But the provider must surely be using "my" money to pay the commission, taken out before they calculate the payments, where else would it come from?

With commission, they lower the annuity rate compared to the nil commission rate that is used by IFAs.   However, IFAs reduce the fund value by the fee.

So, in effect, you get the following:
Commission: fund value with no fee reduction multiplied by a lower annuity rate.
Fee: fund value reduced by a fee (taken against the 75% element, not the 25%) multiplied by the full annuity rate,

DRS1

RogerPensionGuy said:

Reference DRS1 post above, I have checked my SIPP providers and one says they provide annuities, but will advise at quote if others pay more income, the other providers appear to say they will link me up to a buying service whereby I guessing that SIPP provider gets a kickback.

Reference Albermarle post above, I also guess gilts will be sticky for a period so I don't expect annuity rates to slip down too quickly, but anythink possible.

***

I asked various internet AI outlets the following question, they provided nice information, answers/information was a bit long, so suggest anyone interested just ask the same or similar question. 

"I am wondering if buying an annuity that is RPI linked or a 5% index is the best option, trying to view historically the best option"

***

I think the feeling about buying an annuity being RPI or a fixed % linked is a bit like that old chestnut of sequencing, sequence risk and feeling lucky or not lucky.

My gutt feeling is there's too much government debts on the books and a period of higher inflation maybe a fair bet for income security and the RPI feels like a reasonable way to go.

Maybe get 2 annuities, one RPI & one a fixed % index. 

I tend to think of SIPP providers as outfits like AJBell, HL or ii.  The annuity providers are Aviva Canada Life Just Legal & General Scottish Widows and Standard Life.  I guess most of them also do SIPPs

You are probably right about annuity rates.  As I have just accepted a quote for one the rates are bound to get better for a year or two.

After buying one last year as well it looks like I am going to end up with one of each - but that was more accident than design.  It will be interesting to compare the increases.

Albermarle

My gutt feeling is there's too much government debts on the books and a period of higher inflation maybe a fair bet for income security and the RPI feels like a reasonable way to go.

I am not an economist, but I thought the main drivers of inflation were more linked to things like the oil/gas price, supply chain disruptions ( Covid, Ukraine), bad harvests, wage rises, strong booming economy etc
rather than Govt Debt.
Unless you mean the Govt are not too stressed about fighting inflation as it reduces Govt debt burden?

dunstonh

Albermarle said:

My gutt feeling is there's too much government debts on the books and a period of higher inflation maybe a fair bet for income security and the RPI feels like a reasonable way to go.

I am not an economist, but I thought the main drivers of inflation were more linked to things like the oil/gas price, supply chain disruptions ( Covid, Ukraine), bad harvests, wage rises, strong booming economy etc
rather than Govt Debt.
Unless you mean the Govt are not too stressed about fighting inflation as it reduces Govt debt burden?

Both the US and the UK ran policies that allowed inflation to rise post-WWII as a means to reduce the debt burden.   (disregarding the bits the inflation movements that governments cannot control).   So, it is a tactic used before.   However, the UK has issued more index linked certs in modern times and won't gain as much from that tactic.

chuffinnora

This thread is so informative and just the kind of information I was looking for.

I have DC funds in 2 places:

£500k approx in RL.
£60k approx in L&G.

If I wanted to take out a 5-10 year fixed annuity using part of my funds, and got quotes from example HL or an IFA.
What happens once I have found one, does HL or IFA transfer those funds out of my DC pots, or do I request that from them direct? Just trying to understand the process once I get to that point in time.