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Hargreaves defends enhanced annuity commission payments

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Hargreaves Lansdown head of pensions research Tom McPhail

Hargreaves Lansdown has defended the level of commission it takes on a new online enhanced annuity shopping around service.

Hargreaves launched the enhanced annuity search engine last week.

The search tool sources rates from nine providers covering around 92 per cent of the annuity market.

The five enhanced annuity providers on the panel are Aviva, Just Retirement, LV=, MGM Advantage and Partnership.

Hargreaves says the tool is likely to appeal to savers with pension funds worth less than £30,000 who advisers may be unwilling to service, although it is not restricted to people with small pots.

However the annuity broker has been criticised for taking commission of up to 3.5 per cent, taken from the pot, when a customer buys an enhanced annuity through the service.

Better Retirement Group director Billy Burrows says: “If you think about a pension pot of £100,000, an adviser would charge around £2,000 to provide a full advice service. If they go through Hargreaves they could pay more than that for a non-advised shopping around service.

“The FSA has created an unfair level playing field because non-advised firms can charge more through commission than an adviser charging a fee. But customers still think advised is expensive and no advised is cheaper.

“The RDR has effectively distorted the market in favour of non-advised brokers.”

Worldwide Financial Planning IFA Nick McBreen says: “Certainly 3.5 per cent is a lot to take from a £30,000 pension pot and I would question whether this is a good solution for people with small pension pots.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “We have launched this service because the vast majority of people are not getting advice and are not getting access to enhanced annuities. We are delivering a solution to that problem.

“It is all very well saying people should be getting advice but the reality is they are not.”

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