Annuity advice: do you need an adviser and where to get it free

Free annuity advice in the UK is really guidance: Pension Wise explains your choices and MoneyHelper compares quotes, while regulated advice costs money.

Pension Wise, the government-backed service from MoneyHelper, explains your options for taking a pension without charge, and MoneyHelper's annuity comparison tool costs nothing either. An FCA-authorised adviser can weigh annuity quotes, health answers and tax together; the form on this page begins with a free phone call. Nothing on this page is a recommendation to buy.

Do you need a financial adviser to buy an annuity?

Not by default. MoneyHelper says that with some financial products, getting financial advice first is mandatory, but "for most things, financial advice is optional and can be costly, so you’ll need to weigh up if it’s right for you." For an annuity it sets out three routes: its comparison tool, quotes you collect from different annuity providers yourself, or a regulated adviser who recommends a provider and product.

The route can depend on the product, because in some cases "you might need to use an annuity broker or financial adviser to access a product." Help matters because the decision is hard to reverse: when the cooling-off period is over, you normally cannot change your mind.

What an annuity is, and whether it suits a particular pot, are covered in how a pension annuity works and whether an annuity is worth it.

Where can you get free annuity advice?

The free route is Pension Wise, which is guidance rather than advice. It suits savers with a UK-based defined contribution pension once they reach 50; a few younger people qualify too, such as those retiring early on health grounds or inheriting a pension. The online session covers ages 50 to 74, phone sessions are booked for a set time, and you can have more than one appointment.

Pension Wise explains your options for taking the money, but it draws a line: its specialists "cannot recommend specific products or provide advice on what’s best for you to do." If you do not qualify, MoneyHelper says its pension guides and tools and free guidance by phone, webchat or email are still available. For more, see what Pension Wise covers and other sources of free pension help.

Free guidance or regulated advice: what is the difference?

The FCA draws the line this way: "advice requires an element of opinion on the part of the adviser. In effect, it is a recommendation as to a course of action. Information, on the other hand, involves statements of fact or figures." Guidance supplies the facts and the choices. MoneyHelper calls it a general overview of your options, after which you decide how to act.

A regulated adviser goes further and recommends. MoneyHelper says to use only an adviser regulated by the FCA, and to look the adviser or firm up on the Financial Services Register to confirm it is authorised to give advice. Regulated advice also brings a way to complain and ask for compensation if it turns out to be unsuitable.

That service is not free. Charging methods differ: some advisers bill by the hour, some quote one fixed fee, and some charge a fee based on the value of your pension. In MoneyHelper's words, "you must be told how much the advice will cost before you commit." Get the figure in pounds, and check whether the firm is independent or restricted. Talking your annuity choices over aloud can help, and an FCA-authorised adviser will return your call at no cost when you send off the brief form on this page. Compare charges on what pension advice costs and whether advisers are worth it.

Whichever route you take, an unexpected call, email or text offering help with your pension is a warning sign; MoneyHelper's guidance is never to take advice because of one (see how pension scams work).

Comparing providers: what your open market option gives you

The open market option is the right to buy your annuity from a provider other than the one holding your pension. The FCA defines open market options as "the options available to a scheme member to access their pension savings on the open market", and says the aim of its rules is "to encourage them to shop around."

Under COBS 19.4, the firm that runs a personal pension, stakeholder pension, FSAVC, retirement annuity contract or buy-out contract must send an open market options statement shortly after your 50th birthday ("within two months after the client reaches 50 years of age") and again four to ten weeks before every fifth birthday after that, with exceptions such as a statement sent in the previous 12 months. Other triggers include asking for a retirement quotation more than four months before your intended retirement date, or applying to take money for the first time. At least six weeks before your planned retirement date the firm must also remind you and recommend the pensions guidance. FCA guidance adds that, when writing to you about your options, a firm should "prominently highlight the ability to shop around and state clearly that other providers might offer pension decumulation products that are more appropriate for the client’s needs and circumstances and may offer a higher level of retirement income."

MoneyHelper's order of play is to check your current provider first, including for a guaranteed annuity rate (see what a guaranteed annuity rate is), then compare: "always compare annuity providers to find the best deal for you, including your existing pension provider". It also says advisers "might be able to access better annuity rates than are available to you directly." For the costs that go with each route, see annuity fees in the UK.

Can your health or lifestyle raise the income?

It can. Providers put medical and lifestyle questions to you to gauge how long you may live. According to MoneyHelper, a higher offer is possible with some health conditions (its examples are diabetes, high blood pressure and cancer), with excess weight or smoking, after manual-type work, or if you live where life expectancy is lower. Both "impaired life" and "enhanced" describe these annuities, and the provider could ask for your GP's input or an examination.

The detail sits on enhanced annuity rates, who qualifies and the application questions.

Commission, bias, timing: what people ask before choosing an annuity adviser

Is anything taken out of my annuity to pay the person helping me?

How fees and commission fit into the cost of an annuity is set out on annuity fees in the UK. Whether any payment is built into a quote in front of you is fair to ask, at no cost, once an FCA-authorised adviser rings in reply to the brief form on this page.

What does unbiased annuity advice mean?

MoneyHelper describes two main types of adviser. Independent advisers can search the entire market, while restricted advisers usually advise on a specific type of product or recommend from a certain number of providers; both give advice tailored to you. You can ask any adviser, including whichever firm you end up speaking to, which type it is and how it charges.

Who are the best annuity providers for the over-sixties?

There is no single best, because the rate you are offered depends on factors including your age and health. Rates also move, so a ranking goes out of date. What drives the figures is on annuity rates in the UK.

Can I use Pension Wise and an adviser as well?

Yes. MoneyHelper notes that guidance and paid advice can be combined, and suggests starting with guidance if you doubt that paying is worth it.

How long do I have to change my mind after buying an annuity?

MoneyHelper says the cooling-off period on most annuities lasts 30 days; after that the purchase cannot be undone, so read the terms before signing.

Getting your own figures looked at

Anyone who prefers a person to talk it through can request a call-back here, free of charge, and put annuity questions to an FCA-authorised adviser. Advice that follows may carry a charge, which must be stated before you commit. Whichever route you choose, compare what other providers would offer before you buy.