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IFA's commision for annuity arranging
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cyclonebri1
Posts: 12,827 Forumite
Hi, went to see an IFA today for the 1st time ever.
Came away somewhat confused for various reasons that I don't need to explain here.
2 questions, his charge for arranging an annuity is 2.5% com. I was expecting less. Is this typical or on the high side?
I have a projection from the company I had my personnel pension plan with. This still seems a favourable route. Would his charge be covered by their commision to him or would I be better just to deal direct?
There are other queries that I'll go into later if needed.
Thanks in advance
Came away somewhat confused for various reasons that I don't need to explain here.
2 questions, his charge for arranging an annuity is 2.5% com. I was expecting less. Is this typical or on the high side?
I have a projection from the company I had my personnel pension plan with. This still seems a favourable route. Would his charge be covered by their commision to him or would I be better just to deal direct?
There are other queries that I'll go into later if needed.
Thanks in advance
I like the thanks button, but ,please, an I agree button.
Will the grammar and spelling police respect I do make grammatical errors, and have carp spelling, no need to remind me.;)
Always expect the unexpected:eek:and then you won't be dissapointed
Will the grammar and spelling police respect I do make grammatical errors, and have carp spelling, no need to remind me.;)
Always expect the unexpected:eek:and then you won't be dissapointed
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Comments
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his charge for arranging an annuity is 2.5% com. I was expecting less. Is this typical or on the high side?
However, is this a commission or is this a fee? If it a fee and you have a small annuity and you are representing the fee as a percentage of the fund value then it could be misleading.I have a projection from the company I had my personnel pension plan with. This still seems a favourable route. Would his charge be covered by their commision to him or would I be better just to deal direct?
Fee or commission? If its commission, then dont get to wrapped up in that. The company paying 0.5% commission can have lower income to you than the company paying 2.5%. You dont buy a washine machine from the company with the lower profit margin. You buy from the one that sells it to you cheapest (or offers a service that justifies the extra cost).
Assuming the 2.5% is a commission and not a fee, then this would indicate you suffer ill health or are a smoker. In which case the annuity from your pension plan provider will be lower. Also, the IFA has no choice but to recommend the higher of your existing provider or the open market option. We cant just pick and choose at random.Would his charge be covered by their commision to him
You need to clarify with the IFA if you are paying a fee or he is operating on commission. If fee, then commission can offset it. However, you should be aiming for 1 to 1.5% as fee or taken commission.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
dunstonh says "Assuming the 2.5% is a commission and not a fee, then this would indicate you suffer ill health or are a smoker. In which case the annuity from your pension plan provider will be lower."
Is the annuity for ill-health/smoker not higher on account of higher risk/shorter life?Named after my cat, picture coming shortly0 -
caveat_emptor wrote: »dunstonh says "Assuming the 2.5% is a commission and not a fee, then this would indicate you suffer ill health or are a smoker. In which case the annuity from your pension plan provider will be lower."
Is the annuity for ill-health/smoker not higher on account of higher risk/shorter life?
Perhaps I could have worded that a little better.
The pension provider will offer standard terms. Very few providers for the in-house scheme will enhance the annuity if you are a smoker or suffer ill health.
Virtually all the standard terms providers pay a commission of 1-1.5%. So the fact 2.5% is mentioned (and I think that is the maximum from memory) indicates it is likely to be a smoker/ill health provider as they are the ones that allow more to be paid.
I am wondering now if the IFA the OP refers to is giving a typical maximum possible rather than actual commission. On the menu given out at the start, that would show typical maximum and average. At the beginning, the IFA wouldnt know what company is likely to come out best so the only figures available for remuneration are on that menu.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Hi, just been through his client agreement form and it definately states 2.5% commision for arrangement of annuities, his alternative fee is something like £175/hr.
We were talking about the offer that L&G had prepared for me. It was not impaired life and he doesn't think I will get that so his rate wouldn't be taking advantage of that.
Although I've finished work under disability, well it's highly likely, they are largely physical rather than medical problems, but I due suffer from a chronic chest condition, have done for around 40yrs and am on 2 forms of medication for this so I did wonder If I could get impaired lifeI like the thanks button, but ,please, an I agree button.
Will the grammar and spelling police respect I do make grammatical errors, and have carp spelling, no need to remind me.;)
Always expect the unexpected:eek:and then you won't be dissapointed0 -
Go with a cheaper IFA. L&G commission is 1.3% so if he is saying 2.5%, then you will have to pay another 1.2%.
2 medications is the usual minimum to qualify but it is subject to acceptance. It really depends on what the medications are. It doesnt take two minutes for the IFA to find out though. Indeed, the main provider in this area usually issues a letter confirming that you cannot get enhanced rates.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks, I was/still am having doubts about the guy I saw, good credentials but.............................
Spent almost all the session coming to the conclusion that was not allowable after I pointed out to him that almost 1/2 my pot was protected rights, which he had on the table in front of him and I had queried earlier Not confidence inspiring, think I will try elsewhere, or may even go on my own.
Do L&G offer impaired life?
Edited to add at least I managed to pick up enough info on here to be aware of some of the basics, thanks again.I like the thanks button, but ,please, an I agree button.
Will the grammar and spelling police respect I do make grammatical errors, and have carp spelling, no need to remind me.;)
Always expect the unexpected:eek:and then you won't be dissapointed0 -
or may even go on my own.Do L&G offer impaired life?
No.
Open market option is a bread and butter transaction for an IFA. Bucket loads of paperwork and often a bit of chasing but the its the sort of transaction an IFA can do with their eyes closed.
Dont let an expensive one put you off. Also, L&G sent out an email today saying they were lowering their annuity rate from today. So, older figures may not be applicable and their guarantee period is very short.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
These tables may give you an idea of what's available:
https://www.fsa.gov.uk/tables
There is also an annuity calculator at https://www.h-l.co.uk (and they will search the market for you, don't know what they charge.)Trying to keep it simple...0 -
There is also an annuity calculator at www.h-l.co.uk (and they will search the market for you, don't know what they charge.)I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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The figures they give suggest maximum commission. That said, 1-1.5% is the norm. When you consider the work, the liability and costs, 1% on a £50,000 fund is just £500. There isnt really a lot of scope to discount unless you start getting into larger funds. Most IFAs will discount with larger funds. Ideally you should look for a cap when that is the case.
Thanks to both for that,
Pot with L&G plus avcs I have available amounts to around £150k in total plus a reasonable amount in savings so I expected a fairly low commision rate. I had asked about this before and was going with advise/info received on here. Will definately not go with this guy.
By how much are L&G annuity rates being reduced? I had a quote vaued for 18 days about a week ago,
Cheers.I like the thanks button, but ,please, an I agree button.
Will the grammar and spelling police respect I do make grammatical errors, and have carp spelling, no need to remind me.;)
Always expect the unexpected:eek:and then you won't be dissapointed0
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