New annuity comparison site offers commission cashback
The execution-only service from Cavendish Online will charge a £100 flat fee and will refund to customers any commission it receives from insurers.
The site currently offers annuities from Aviva, Canada Life, LV= and Legal & General.
Typically, people buy an annuity – a product which converts their pension savings into an income during retirement – via a broker.
However, this can often mean an added cost to the consumer because brokers tend to receive a commission of between 1% and 3% of the purchase price of the annuity from the insurer, even in cases where no advice is given. This is passed on to the consumer in higher annuity prices.
Ian Williams, managing director of Cavendish Online, said: “Hundreds of thousands of people a year buy an annuity and many fall prey to the excessive charges and commissions levied by insurers and brokers out to make a fat profit.
“With commissions of up to 3% for sales which are often non-advised newly retired consumers trying to make the most of their hard earned pension pots can lose thousands of pounds believing that so called ‘free’ annuity finding services aren’t costing them a penny. The reality is that greedy salespeople are feathering their own retirement nests by pocketing hefty commissions.”
However, Alan Lakey of Highclere Financial Services warned that consumers need more guidance when buying an annuity.
He said: “Some consumers will be prepared to deal with an online company but my experience is that the majority will wish to meet with an adviser and discuss in detail even if it is a ‘small pot’.”
Pete Chadborn from Plan Money, added: “The structure of the annuity is at least as important as the annuity rate received so whilst an execution-only service sounds attractive, those using it need to understand that they are making an irreversible decision.”