DIY Annuity purchase?

pitza

I retire this May so I've used pensionwise and I've had a free consultation with a IFA and have decided that an annuity is the way forward for me

but do I really need to pay 1 to 1.5 % of my £240,000 pension pot to an advisor?

Couldn't I shop around myself or is it the case that an advisor has access to deals that I could not get?

molerat

Couldn't I shop around myself or is it the case that an advisor has access to deals that I could not get?

Yes to both.

One of the resident IFAs will be along shortly with a detailed answer.

ali_bear

The commonly held wisdom is that when you go DIY the fee will be built into the rate you get anyway. With an IFA they should be able to offer a discounted rate so for larger purchases such as yours the discounted rate through an IFA should work out better.

You could go both routes in parallel and be in a position to compare and pick either deal at the point of execution.

flaneurs_lobster

Unless you are a tea-total non-smoker in perfect health then you might benefit from an Enhanced annuity.

An advisor with expertise is very useful during the application process for these products, they can be complicated and it's easy to miss detail that might give financial benefit.

dunstonh

but do I really need to pay 1 to 1.5 % of my £240,000 pension pot to an advisor?

no. You can DIY and pay a commission to the provider or distributor instead. That commission can be as much as 3%.

Only a couple of providers retail direct to consumers. And their commission rates are higher than the fee you mentioned here. So, yes, you can go there without the adviser, but you will likely get a worse outcome.

There are online annuity brokers but they will have a commission too. (non-advised take a commission and the annuity rate is lower to factor in that commission. IFAs cannot take a commission but you can deduct the fee from the pension fund after the tax free cash has been paid. So, its a higher annuity rate against a lower fund value). An annuity broker with a 1% commission and an IFA with a 1% fee would give a broadly similar outcome.

pitza

Thanks for all your replies, I now understand why using an advisor could be the better option.

The advisor I saw I got on with very well, he was recommended by a family member but he charges 1.50 % , is that a reasonable amount?

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/81914366#Comment_81914366

Its in the ballpark of what you would be looking for.

HappyHarry

https://forums.moneysavingexpert.com/discussion/comment/81914366#Comment_81914366

It depends on the amount. On £1m it would be high, on £30,000 it would be quite low.

As said above, the in-house sales forces for annuity providers charge up to 3% commission.

DRS1

Did your IFA actually get you an annuity quote? If so you could compare it to quotes you get via online annuity quoters (like on the Moneyhelper tool

Compare annuities: get a guaranteed retirement income -)

If your pension is with an insurer (like Aviva) who also do annuities then you could get a quote from them direct but as mentioned above that rate will have commission built into it. So going direct will not save you money compared to using an IFA (or an annuity broker)

Secret2ndAccount

Go to the Hargeaves Lansdown online annuity checker:

https://annuitysupermarket.hl.co.uk/PersonalClient.aspx

Put in all the same numbers and all the same medical details as you gave to the advisor, and see what quotes come out.

Not saying HL is the cheapest, but they do have a nice online tool.

pitza

My advisor hasn't given me any quotes yet, We've just had the initial free meeting where he talked through my options.