Brokers Commission Question

n58

I have retired from work this July at 67, I have worked an extra year, and have been contemplating taking out an annuity.

I have had a few quotes a couple of weeks ago from HL and Money Helper, Money Helper quotes were highest.

Searching through annuity information online, I have found a couple of conflicting answers regarding whether an individual can go direct to a an annuity provider or not, I know exactly what options I need for my case.

To facilitate execution, I have approached a known broker and strangely their quotes even for enhanced annuity were lower than even the standard annuity from MH.

Once the forms have been filled in, (I have not signed yet),I have discovered from L&G annuity information that the broker commission works out at 2.45% of the accumulated pot in excess of 270k, just £300 shy of 7k, is this a normal commission for a broker? it seems pretty excessive for me and probably this is why the quotes from the broker are lower than MH.

I am worried that if I don't take out an annuity soon, the rate may change based on the bank lowering interest rates.

My questions are:
Do I ignore the high broker commission and just go ahead with the highest quote from the broker?

Try and go direct by calling a few providers to see whether they accept direct customer?

Delay for a further two weeks (as I am abroad currently) and speak with an IFA when I get back home to the UK?

wjr4

That is very expensive. Speak with an IFA. 

DRS1

One year ago I tried to go direct with the two highest quotes I got on Moneyhelper (Standard Life and Scottish Widows) and neither would talk to me.  I ended up using a broker (Retirement Line) and yes they got a hefty commission so an IFA may have been cheaper (if you can find one who will just buy an annuity for you)

You should know that there is a commission written into the annuity rate so even if you do buy direct (eg from your current pension provider if it is an insurer like Standard Life etc) you will see a commission figure of say 1%. 

Don't fuss about it you are never going to see that money.  What matters is who provides the best annuity rate.

If enhanced is less than standard then something is wrong - perhaps do a requote on Moneyhelper and see it their rates have changed.  @dunstonh will explain that they use one system for quotes which may not be as up to the minute as the one IFAs use.

Albermarle

For enhanced annuities it seems better to go via an IFA, as they know the system very well.
You have to pay them but they get discounted annuities from the provider, so there should not be any more in charges going down this route. Maybe even be less.

n58

DRS1 said:

One year ago I tried to go direct with the two highest quotes I got on Moneyhelper (Standard Life and Scottish Widows) and neither would talk to me.  I ended up using a broker (Retirement Line) and yes they got a hefty commission so an IFA may have been cheaper (if you can find one who will just buy an annuity for you)

You should know that there is a commission written into the annuity rate so even if you do buy direct (eg from your current pension provider if it is an insurer like Standard Life etc) you will see a commission figure of say 1%. 

Don't fuss about it you are never going to see that money.  What matters is who provides the best annuity rate.

If enhanced is less than standard then something is wrong - perhaps do a requote on Moneyhelper and see it their rates have changed.  @dunstonh will explain that they use one system for quotes which may not be as up to the minute as the one IFAs use.

I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.

DRS1

n58 said:

DRS1 said:

One year ago I tried to go direct with the two highest quotes I got on Moneyhelper (Standard Life and Scottish Widows) and neither would talk to me.  I ended up using a broker (Retirement Line) and yes they got a hefty commission so an IFA may have been cheaper (if you can find one who will just buy an annuity for you)

You should know that there is a commission written into the annuity rate so even if you do buy direct (eg from your current pension provider if it is an insurer like Standard Life etc) you will see a commission figure of say 1%. 

Don't fuss about it you are never going to see that money.  What matters is who provides the best annuity rate.

If enhanced is less than standard then something is wrong - perhaps do a requote on Moneyhelper and see it their rates have changed.  @dunstonh will explain that they use one system for quotes which may not be as up to the minute as the one IFAs use.

I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.

The 1% was not for advice.  It was when I asked my pension provider to let me have their annuity (so you might say it was 1% for not much at all).  It was literally Me Can I have an annuity quote please Them here it is Me OK I accept Them Here is the lump sum and this is the first annuity payment.

I simplify it obviously but the provider is not allowed to give "advice" and since I knew what I wanted I did not ask for any.

I think you might want to think of 1% as a floor or a target - if you can do better than that then well done.  Retirement Line certainly got more than 1% last year

An IFA will give you advice and may cost 1% (or a little more - I wouldn't know) but some of them get very interested in the whole financial picture not just the annuity and some people don't like that.  Especially if the IFA decides they need ongoing advice on all their investments with attached ongoing fees. 

Jerben

‘I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.’

But you don’t pay 2.45%.
That is an ‘arrangement’ between the broker and the annuity provider.
The only thing that matters is the value of the annuity to you.

n58

Jerben said:

‘I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.’

But you don’t pay 2.45%.
That is an ‘arrangement’ between the broker and the annuity provider.
The only thing that matters is the value of the annuity to you.

If this is an arrangement between the provider and the broker, why is this figure mentioned on the provider paperwork.

I believe that this commission comes out the customer's annuity pot, otherwise, surely, they would not mention it on the providers documentation they provide the customer? 

I think that possibly, this is why the brokers quote was less than the MH quote I had two weeks ago, it was even lower than the standard annuity quote I had received.

DRS1

n58 said:

Jerben said:

‘I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.’

But you don’t pay 2.45%.
That is an ‘arrangement’ between the broker and the annuity provider.
The only thing that matters is the value of the annuity to you.

If this is an arrangement between the provider and the broker, why is this figure mentioned on the provider paperwork.

I believe that this commission comes out the customer's annuity pot, otherwise, surely, they would not mention it on the providers documentation they provide the customer? 

I think that possibly, this is why the brokers quote was less than the MH quote I had two weeks ago, it was even lower than the standard annuity quote I had received.

No That is not likely: commission rates are built into the annuity rates.

Did you get a new MH quote?

n58

DRS1 said:

n58 said:

DRS1 said:

One year ago I tried to go direct with the two highest quotes I got on Moneyhelper (Standard Life and Scottish Widows) and neither would talk to me.  I ended up using a broker (Retirement Line) and yes they got a hefty commission so an IFA may have been cheaper (if you can find one who will just buy an annuity for you)

You should know that there is a commission written into the annuity rate so even if you do buy direct (eg from your current pension provider if it is an insurer like Standard Life etc) you will see a commission figure of say 1%. 

Don't fuss about it you are never going to see that money.  What matters is who provides the best annuity rate.

If enhanced is less than standard then something is wrong - perhaps do a requote on Moneyhelper and see it their rates have changed.  @dunstonh will explain that they use one system for quotes which may not be as up to the minute as the one IFAs use.

I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.

The 1% was not for advice.  It was when I asked my pension provider to let me have their annuity (so you might say it was 1% for not much at all).  It was literally Me Can I have an annuity quote please Them here it is Me OK I accept Them Here is the lump sum and this is the first annuity payment.

I simplify it obviously but the provider is not allowed to give "advice" and since I knew what I wanted I did not ask for any.

I think you might want to think of 1% as a floor or a target - if you can do better than that then well done.  Retirement Line certainly got more than 1% last year

An IFA will give you advice and may cost 1% (or a little more - I wouldn't know) but some of them get very interested in the whole financial picture not just the annuity and some people don't like that.  Especially if the IFA decides they need ongoing advice on all their investments with attached ongoing fees. 

There shouldn't be any ongoing advice for an annuity, it's set up and that's it.

For drawdown it will probably be a different story.

I know exactly why annuity I would like including all the different options, it shouldn't take any time at all for a broker to set up, especially that all the information was provided straight away, their quotes were sent back the same day the information was provided, they must use a software where all the info is inputted and the quotes are provided with a press of the enter key on a keyboard, but, I may be wrong.

Why should advice from an IFA cost less than a non advice from a broker for an annuity set up?

DRS1

n58 said:

DRS1 said:

n58 said:

DRS1 said:

One year ago I tried to go direct with the two highest quotes I got on Moneyhelper (Standard Life and Scottish Widows) and neither would talk to me.  I ended up using a broker (Retirement Line) and yes they got a hefty commission so an IFA may have been cheaper (if you can find one who will just buy an annuity for you)

You should know that there is a commission written into the annuity rate so even if you do buy direct (eg from your current pension provider if it is an insurer like Standard Life etc) you will see a commission figure of say 1%. 

Don't fuss about it you are never going to see that money.  What matters is who provides the best annuity rate.

If enhanced is less than standard then something is wrong - perhaps do a requote on Moneyhelper and see it their rates have changed.  @dunstonh will explain that they use one system for quotes which may not be as up to the minute as the one IFAs use.

I don't mind paying 1%, especially if it's for advice, but 2.45% for none advised annuity from a broker is why too high, this equates to nearly a full year's pension contribution.

The 1% was not for advice.  It was when I asked my pension provider to let me have their annuity (so you might say it was 1% for not much at all).  It was literally Me Can I have an annuity quote please Them here it is Me OK I accept Them Here is the lump sum and this is the first annuity payment.

I simplify it obviously but the provider is not allowed to give "advice" and since I knew what I wanted I did not ask for any.

I think you might want to think of 1% as a floor or a target - if you can do better than that then well done.  Retirement Line certainly got more than 1% last year

An IFA will give you advice and may cost 1% (or a little more - I wouldn't know) but some of them get very interested in the whole financial picture not just the annuity and some people don't like that.  Especially if the IFA decides they need ongoing advice on all their investments with attached ongoing fees. 

There shouldn't be any ongoing advice for an annuity, it's set up and that's it.

For drawdown it will probably be a different story.

I know exactly why annuity I would like including all the different options, it shouldn't take any time at all for a broker to set up, especially that all the information was provided straight away, their quotes were sent back the same day the information was provided, they must use a software where all the info is inputted and the quotes are provided with a press of the enter key on a keyboard, but, I may be wrong.

Why should advice from an IFA cost less than a non advice from a broker for an annuity set up?

Because the broker gets paid commission by the annuity provider.  The IFA gets paid a fee by YOU.

Commission bears absolutely no relation to the work done by the broker.

The only way you are going to get near an annuity rate without a commission built into it is to use an IFA