No Advice Annuity Commission Ban

No Advice Annuity Commission Ban.

Finally, the finance industry regulator, the Financial Conduct Authority (FCA) has woken up to the issue of full commissions still being paid on annuities when no advice is given. The FCA has confirmed a consultation period to look at this issue.

According to the FCA, the Financial Services Consumer Panel had completed some research and found that commission rates for a standard annuity were between 1% and 1.5% and for enhanced/smoker/ill-health annuities the commissions varied between 2.5% and 3%.

There are many pension annuities arranged when no advice is given. No advice means no liability should the annuity be unsuitable for the consumer. Examples of no advice annuity services:

Existing pension company A issuing you with a retirement annuity illustration with annuity company B (because they have an agreement to introduce annuities to that company)

Online annuity comparison services: you offer your basic details and a selection of annuity rates are offered and then you click to proceed.

In both of these examples you will have bought an annuity with your pension fund with no advice. No advice means full commission can be paid (without any comeback or liability), which in many cases is actually more expensive than if you had approached a financial adviser, agreed a fee with your adviser, and then the adviser researches the whole market to find you the most competitive and suitable annuity to meet your needs.

We are delighted with the consultation, we hope that commission will be banned for non-advised sales of annuities or indeed all financial services products. This is in the best interest of the consumer where choice is given to either do it yourself and secure an annuity without allowances for commissions to be paid or to agree a fee/commission with an adviser where you know that you receive help that you have paid for but also the fact that the adviser takes on the liability for finding you the most suitable annuity for your needs.