When the time comes to buy an Annuity you essentially have two choices; the DIY approach or take advice from an Independent Financial Adviser (IFA).
Being IFAs you would expect us to champion the advice route, but read on and we will explain in more detail why we believe you should always take advice when buying your Annuity.
Probably the biggest reason we hear for not using an IFA is cost, we should therefore deal with that objection first.
Frankly it’s a myth that going direct to arrange your Annuity will save the commission and get a better Annuity rate.
If you go direct to arrange your Annuity the provider will still take commission; they will just keep it as a windfall. Try it for yourself, get a quote from an Annuity provider and take a look at the commission they are taking!
Indeed we have seen cases where the commission a provider proposed to take, when the consumer was going direct, was substantially more that we were taking, resulting in a worse Annuity rate and lower income.
In other words, if you go direct, the commission will be deducted anyway, you might as well therefore take advice for the reasons outlined below.
Access to a wider range of providers
Whilst online pension Annuity calculators will give you a good picture of what most Annuity providers offer, some will only deal with IFAs and not directly with the public.
Therefore to get a true picture of what every Annuity provider can offer, you need to use an IFA to fully research the market on your behalf.
Most IFAs, including Investment Sense, will carry out the research for you without cost or obligation. If at the end of that process you decide not to proceed you have lost nothing, of course if you do accept the recommendation you will be able to take comfort from the fact that every provider will have been considered.
An Annuity isn’t the only option
Whilst an Annuity may well be the right option for you, especially of you want a simple solution which provides a guaranteed income for the rest of your life, you should also consider all the other options available to you.
Buying an Annuity is a one way street, there are no u turns once you have completed the purchase, it therefore makes sense to consider all the options available to you before you make the final decision to go ahead.
There are at least seven other ways of taking an income from your pension fund, for example, Fixed Term Annuity, Investment Linked Annuity, Enhanced Annuity, Capped Drawdown and Flexible Drawdown. All options involve additional investment risk, but should be considered and then discounted before you decide to go ahead with an Annuity purchase; an IFA can help you with this decision.
It’s probably stating the obvious that you should choose an IFA who has the relevant knowledge and experience to advise you on your Annuity purchase.
An experienced IFA has done this many times before; the average retiree has not.
Is now the time to be learning a new skill? Especially as an Annuity cannot be changed in the future.
Don’t get us wrong, we have no monopoly on good ideas and we work in a collaborative way with all clients, but we do this every day, and know the Annuity market like the back of our hand, including a few little tricks to help you get the best income possible from your pension.
An Enhanced Annuity can give a higher income to those people who suffer from ill health or have lifestyle factors, such as smoking, which may impair life expectancy.
It’s vital that to consider whether you qualify for an Enhanced Annuity, with even relatively minor conditions qualifying, you might be surprised at the increases available.
Here at Investment Sense we spend time understanding any medical conditions that you suffer from and then submit the details to all the Enhanced Annuity providers for their consideration. We then collate all the responses and make our recommendation to you.
By using an IFA you only have to go through your medical history once and not with every provider you speak to, saving precious time and a lot of hassle.
We will also speak to each of your existing pension schemes to confirm whether or not you qualify for a Guaranteed Annuity Rate (GAR), which can be extremely valuable, and also whether your existing scheme will offer the best Annuity rate.
Again, you could do this yourself, but it can be time consuming and if your Annuity provider is going to keep the commission anyway, why to let us do this for you?
It is perfectly possible to arrange your own Annuity and the DIY market is certainly growing, but if you want to consider all options, make sure every Annuity provider has been researched and significantly reduce the hassle, then using an IFA will have significant advantages.
Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email firstname.lastname@example.org