There isn’t a week that goes by where an Irish based Life & Pension company complains about the perilous state of their market. They are all in a ‘race to the bottom’ as they struggle with profitability and retention of business.
The Life & Pension market has nosedived about 60% since its peak in 2007. There is no way that anything like this number of regulated entities have exited the market since then. (I’m awaiting a reply from the regulator on the percentage increase/decrease since 2007.) So, where is their income coming from if there’s less ‘new’ business to go around? How can they all survive a decrease like 60%?
The dogs in the street know that there is a problem but no one seems to be doing anything about it, except complain. The only conclusion that I can come to is that the Life & Pension companies don’t think it’s their responsibility to change anything. If fact, there may be a mindset within the industry that is waiting for the regulator to ‘do something’.
The thing is, it’s not the regulator’s problem. The Life & Pension companies have created the problem themselves and it would not make sense for the regulator to intervene as, on the face of it, the consumer is benefiting from reductions in life insurance rates and enhanced allocation rates for pension/investment business.
As far as I am aware, Life & Pension companies have to submit annual figures on how many policies 'replace an existing contract, in whole or part', so the regulator should know what they’re looking at.
It may be that the Life & Pension companies want the regulator to say ‘your business model is doomed and you have to change it’. Of course, this would suit the companies as they could then ‘blame’ the regulator for insisting on change and save face with their broker/advisor market.
In the meantime, those who rewrite life insurance every few years will be rubbing their hands with glee at the prospect of rate changes (again) in December due to new gender equality legislation. ‘New’ policies means ‘new’ income. The downward spiral continues.
Tuesday, April 10, 2012
Friday, March 23, 2012
(Snap) Annuity Survey 21/03/2012
There are currently only three main players in the annuity market in Ireland. Irish Life, New Ireland and Zurich Life are the only companies that are actively competing for annuity business.
You may get a quote from Friends First, Standard Life or Canada Life and it may be worth bearing in mind that sometimes they might be competitive with their rates.
For the purpose of this post, I am limiting it to the three that are currently interested in doing business.
The maximum commission that can be paid to an advisor by Irish Life is 2% of the purchase price. New Ireland is 3% and Zurich Life is 2.5%.
Zurich Life €6,792.48 pa
New Ireland €6,774.60 pa
Irish Life €6,680.70 pa
Even though the commission rate on the Zurich & New Ireland annuities is assumed at 2.5% for the quote above, they are currently quoting higher rates than Irish Life with a max commission of 2%.
Buying the annuity directly from the pension provider will incur a commission charge. This will more than likely be 2%.
If you decided to buy the annuity on an ‘execution only’ basis (no advice) via a broker you could negotiate a lower commission or pay a fee to execute the transaction.
For the ‘execution only’ service available at www.PensionAnnuity.ie the annuity payable per annum would be €6,938.52
Quote based on the following customer details:
Male 15/03/1947, Female 15/03/1952, €150,000, Guarantee period 5 years, Level annuity, Reversion rate 66.67%, Payable monthly in advance
You may get a quote from Friends First, Standard Life or Canada Life and it may be worth bearing in mind that sometimes they might be competitive with their rates.
For the purpose of this post, I am limiting it to the three that are currently interested in doing business.
The maximum commission that can be paid to an advisor by Irish Life is 2% of the purchase price. New Ireland is 3% and Zurich Life is 2.5%.
Zurich Life €6,792.48 pa
New Ireland €6,774.60 pa
Irish Life €6,680.70 pa
Even though the commission rate on the Zurich & New Ireland annuities is assumed at 2.5% for the quote above, they are currently quoting higher rates than Irish Life with a max commission of 2%.
Buying the annuity directly from the pension provider will incur a commission charge. This will more than likely be 2%.
If you decided to buy the annuity on an ‘execution only’ basis (no advice) via a broker you could negotiate a lower commission or pay a fee to execute the transaction.
For the ‘execution only’ service available at www.PensionAnnuity.ie the annuity payable per annum would be €6,938.52
Quote based on the following customer details:
Male 15/03/1947, Female 15/03/1952, €150,000, Guarantee period 5 years, Level annuity, Reversion rate 66.67%, Payable monthly in advance
Buying an Annuity - Options
If you have a pension fund maturing and you are in the market for an annuity, you should realise that there are options available in respect of how you buy the product.
The pension company that has been managing your fund will probably offer you an annuity rate but you are not restricted to taking this. You can shop around for the best rate that is available on the market.
If you need advice on the best annuity provider or on the options that may be available on the product, then you are going to have to pay for this advice. In the vast majority of cases this is paid for by commission from the annuity provider to the advisor. Commission rates vary in Ireland from 0% to 3% of the purchase price.
If the commission rate is 0% then you will obviously pay a fee to the advisor for his/her work on the advice you receive and in the placing of the product with the provider. The larger your pension pot, the more likely that the fee method of payment will suit and you should negotiate the fee with the advisor.
As an alternative, you can also buy an annuity via an ‘execution only’ service. You will not receive advice on which provider is the ‘best’ or on the options available under the contract but you will receive an annuity rate that will be enhanced because the cost associated with the ‘advice’ has been eliminated.
The ‘execution only’ service is suitable for retirees that have a good understanding of their financial needs and that can analyse the merits of a particular product or provider.
So, if you’re in the market to buy an annuity you should explore which purchase route suits you and how you are going to pay for the service provided. Remember, the annuity is for the rest of your life so any discount on charges will benefit you until your demise.
Featured Website PensionAnnuity.ie
The pension company that has been managing your fund will probably offer you an annuity rate but you are not restricted to taking this. You can shop around for the best rate that is available on the market.
If you need advice on the best annuity provider or on the options that may be available on the product, then you are going to have to pay for this advice. In the vast majority of cases this is paid for by commission from the annuity provider to the advisor. Commission rates vary in Ireland from 0% to 3% of the purchase price.
If the commission rate is 0% then you will obviously pay a fee to the advisor for his/her work on the advice you receive and in the placing of the product with the provider. The larger your pension pot, the more likely that the fee method of payment will suit and you should negotiate the fee with the advisor.
As an alternative, you can also buy an annuity via an ‘execution only’ service. You will not receive advice on which provider is the ‘best’ or on the options available under the contract but you will receive an annuity rate that will be enhanced because the cost associated with the ‘advice’ has been eliminated.
The ‘execution only’ service is suitable for retirees that have a good understanding of their financial needs and that can analyse the merits of a particular product or provider.
So, if you’re in the market to buy an annuity you should explore which purchase route suits you and how you are going to pay for the service provided. Remember, the annuity is for the rest of your life so any discount on charges will benefit you until your demise.
Featured Website PensionAnnuity.ie
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