Which annuity provider? Where does the commission come from?

PhoneBook

Thinking of annuitising a portion of my SIPP. Looking at the Hargreaves Lansdown annuity calculator/quote tool.

Example being used is: £100,000 purchase, no tax free cash, 50% spouse pension, 5year guarantee, 3% annual increase. Some enhancements due to health issues.

Quotes coming back at £7,150pa highest from JUST, down to £6,800pa from Canada Life.

Other quotes in between from Standard Life, Aviva, L&G and Scottish Widows, all around £7,050 pa

My questions:

Are all providers much the same or do I need to delve deeply into every T&C for each of them? How to choose, other than on highest offer?

Some providers will pay HL around £1,600 in commission, others around £3,000. To what extent should I take that into consideration? It must come from my £100,000 after all.

westv

The only thing that really matters is how much a month will be paid into your bank account.

dunstonh

Are all providers much the same or do I need to delve deeply into every T&C for each of them? How to choose, other than on highest offer?

Death benefits is where there can be differences but apart from that its the income level.

Some providers will pay HL around £1,600 in commission, others around £3,000. To what extent should I take that into consideration? It must come from my £100,000 after all.

Whilst an IFA fee comes off the pot value and you get a higher annuity rate (as IFAs cannot receive commission), non-advised sales can still take a commission and the annuity rate is lowered to reflect that commission. Economies of scale can apply here. its possible for a higher commission paying product to offer better terms than a lower commission paying one.

ali_bear

Check if the commission is the same % rate for other amounts or does it taper?

Have you tried Retirement Line?

Global events are causing gilts to devalue and you could get considerable variation from one week to the next.

Albermarle

https://forums.moneysavingexpert.com/discussion/6661808/which-annuity-provider-where-does-the-commission-come-from

I am not sure the quote is without tax free cash.

The £100k is after the tax free cash has already been extracted AIUI.

DRS1

Some providers will pay HL around £1,600 in commission, others around £3,000. To what extent should I take that into consideration? It must come from my £100,000 after all.

Yes the commission comes from the £100k. But so what, if they all pay commission. What matters is the amount of annuity you (and your spouse) receives. If the one paying £1600 commission does not give the best annuity rate then don't use them.

The only way the commission will be something to take into account is if you can find an IFA who will charge you a fee and get you an annuity on a commission free basis. Then you might compare the fee to the amount of commission but even then the important thing is what annuity rate you get.

An IFA is the only way you could get a commission free annuity rate - if you get an annuity direct from an annuity company there will be still be commission factored into the rate; it doesn't matter that there is no broker (like HL) in the mix to collect it.