We are all being told that independent financial advisers (IFA’s) want to sell more pension annuities. Good news, but can they handle it? Are they up to speed with all of the complex products in the market? There are many technical issues to understand and not all IFA’s do, even though they might claim that they do.
IFA’s need to know a great deal to be effective and give best advice in the retirement planning market, and the complexities of legacy pension accumulation old-style products are quite vast and wide ranging but to be able to give best device all these technical issues need to be known and understood. Do they all really know their annuity from their elbow?
Do they know which type of conventional annuity is appropriate? Should it be single life, Joint life, level or escalating (and at what rate? 3% fixed, 5% fixed, RPI). Should they include a guarantee in the annuity quotes they prepare for you? Then of course we have the enhanced annuity (or impaired life annuity) to consider. We now have 13 providers of these type of products; do IFA’s know who they all are and the type of information they need?
And then we have with-profits annuities? Are they really any good? How do they work? What anticipated bonus rate (ABR) should be applied? What precisely is an ABR? How does the recently launched Prudential Income Choice Annuity work compared to a straightforward with-profits annuity?
Yes, there is a lot to consider; both for the IFA and for the client. It is not just about getting annuity quotes to find the best annuity rates. Thought has to be given to the type of annuity and the options available to ensure the correct solution is selected.
