Help for those seeking smaller pension annuities
To encourage retirees with smaller pension funds to be able to shop around for better annuity rates using the open market option, Aegon, a major pension annuity provider, has launched a flexible commission model.
Aegon said that people with lower pension funds will struggle to find an adviser because the commission payments for smaller pension annuity purchases do not cover the cost of advice. The only way that these people can receive full advice on their options is to pay an upfront fee to an adviser.
Therefore, Aegon has developed a charging structure in which advisers can agree an appropriate charge for advice with the customer and then set the level of commission from the pension annuity to cover this – up to 3%. For every 1% commission over the standard 1% level paid to the adviser, the annuity will be reduced by the same amount, up to a maximum reduction of 2% .
With the difference between the best and worst annuity rates standing at 10%, more people will be able to boost their retirement incomes under the new charging structure, even with the maximum 2% reduction.
‘By providing the option to increase commission to 3%, Aegon is giving intermediaries the flexibility to offer advice on the options available and obtain a better pension annuity deal for their customers than would otherwise be possible,’ said Mike Douglas, Aegon UK.
