The big picture – When you purchase an annuity from a broker they will get paid commission
What's the problem? – Commission was banned for financial advisers in 2013
What can de done? – Get financial advice before you arrange an annuity.
Ali Hussain wrote a very good article in the Times newspaper on Saturday 18th July in which he highlighted the commissions paid on non-advised annuity sales
I helped Ali with this article by providing some annuity quotes and giving some comments.
The article explained how although financial advisers were banned from being paid commission in 2013, the ban did not apply to brokers who sell annuities and some types of pension drawdown without giving advice.
The commission payable to non-advised brokers can be as much as 3.3% i.e. £3,300 for a £100,000 annuity.
In my view this is both excessive and outrageous because a good adviser can give jolly good advice for much less than this.
It is not just the high commission that is a problem because a potentially bigger problem is the lack of advice. It may appear easy to purchase an annuity without advice because many people think it is simply about getting the highest annuity rate, that is the highest annuity income.
However, getting the highest annuity rate is the easy part , it is much harder to decide whether an annuity is the best solution in the first place because this requires advice.
Getting the highest possible annuity rate if the annuity option is not the right thing for you. In the article I am quoted as saying:
“Why would anyone get an annuity quote from a non- advised broker who deducts more than 3 per cent in commission charges when they can get proper financial advice and pay an advice fee which is considerably less? Non-advised brokers will argue that they get higher annuity rates because of their skill in collecting medical information, but this is nonsense because all insurance companies offer the same basic annuity rates and good advisers can enter details of their clients’ health.”
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