How to get a guaranteed income for life - annuities explained

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0:34After your trial, you'll save an extra£5 a quarter on the subscription, which is exclusive to Making Money listeners. And that's moneyweek.com forward slash money. But there's a link in the description if you just want to click that. And if life expectancy keeps increasing, to buy an annuity at age 65, you've got 20 years of income in theory there. What is the point of an annuity? With rising interest rates, they've gained popularity recently. but are they really worth it? Mark Ormston works for one of the top annuities brokers in the UK, Retirement Line. When is the right time? When does the rate match with the wants and needs?

1:11It's a gamble. It's a bet against life expectancy. People die. Yeah, that's exactly it. I mean, it feels awkward, but that's what an annuity is. I'll be blunt. I'm quite surprised that you're a dashing man. I was like, oh, here we go. The annuities is quite sexy. I was thinking this is going to be, you know. It'll be boring. No, wait. So we've got annuities, local government. I'm assuming this is 18 plus because it's going to get pretty hot and sweaty. It's going to get nice and sexy, isn't it? Yeah, yeah, yeah. But anyway, can we start with a big question then? So what even is an annuity? Yeah, so an annuity is a financial product where you take a pot of money, typically pension funds, but it can be cash, and you give it to an annuity provider and they give you an income for the rest of your life and beyond, dot, dot, dot.

1:59So in theory, you can tailor the product. So it goes to a spouse, beneficiaries, partners, but people typically do it for their own lives. Is it almost like an insurance or an assurance in a way? It's like a guaranteed income, is that right? It's a guaranteed income. So it's all known from the outset. So when you're shopping around, you have to shop around. There's so many gaps and different offerings. so you go on the open market shop around get the best rate but you have a look and goes right that's what i'm going to get or that's what my partner's going to get for the rest of their life fixed guaranteed simple in theory is there like a you say it doesn't have to be a pension it can be a pot of money yeah so if you have like 100 grand you can put it into annuity is there a minimum yeah so with pensions in particular about 2 000 pounds to the minimum just to give you an idea average or the most popular sort of fun value to purchase an annuity somewhere between 50 ,000 and 100 ,000 that's the most popular cohort and what what sort of income are you getting i mean we'll go into all the rates in a minute but right now if i gave you 100 ,000 pounds yeah ballpark what am i getting so for a 65 year old because that's that that's the age that we love to use in pensions for 65 year old that's 7 ,700 pounds a year for the rest of your life and that's your base point so that should be your starting point that's a seven percent return that's so that's relatively high on the basis that 100k might kick out 4k a year but is that 7k static that's 7700 static if you want it to have some sort of inflation protection which you can do so say if you went up three percent a year that starts about 5700 pounds a year for a 65 year old so So you really have to think.

3:40So I think the problem with annuities are that you're really imbalancing your immediate needs. So that higher income that you need right now against those future protections. You don't know what that looks like, especially when you start thinking about death and inheritance and all these sort of points. It gets a bit tricky. But I'm quite surprised that the headline rate initially is so high. I know it's linked to interest rates and we'll come into it in a minute. But what I'm assuming is happening is an insurance company or an annuity provider takes the 100k, they go away and they invest that somewhere.

4:13And they hope to generate a return above and beyond what they pay out. So if they're giving 7%, they haven't got much room there to make a return. No, but that's, like I say, we'll probably get into a little bit more depth. But what they're typically doing is they're investing in UK midterm gilps, so 12-year, 15-year gilps. If you go back to 2020-ish, that rate that I just said, that's 7.7%. That was about 5 % back then. So there was a huge difference. Midterm gilts were 0.5%. Today we're at 4.9%. So there's been a huge jump in recent years. And there's lots of reasons. But none of those numbers are 7 % that you just said.

4:53No, no. None of them are 7%. How are they getting the 7 % if they're only getting 5 %? So they're getting 5 % from the gilts. Then they're allowed to invest in other things as well. And of course, everything that they're doing is a gamble. It's a bet against life expectancy. The half expectancy will die. Yeah, that's exactly it. I mean, it feels awkward, but that's what an annuity is. They're calculating your life expectancy, and then it's up to you to do that. So there's basically a portion of the return. They're basically saying, we know we can get 4%, 5 % by basically sticking it in a bank account almost.

5:25We're going to take a stance that if we lend to a million people, that 10 % of them are going to die early. and that produces a return for us, essentially. And we give a bit of that return to people in their annuity promise to get them through the door. Yeah, 100%. That's exactly how it works. And I think the really important thing is because it's based on individuals' longevity, health and lifestyle information is so important. So when you think about your life insurance and you think about insurance products, typically you go, I've just run a marathon. I can't, I'm really sorry. I'm just slightly breathless because I've just done 30 miles, done quick 5K.

5:59you want to come across really healthy whereas with your annuity provider what you want to turn around and go oh my word i'm so unfit my bmi is unbelievable i basically have half a bottle wine a night 70 cigarettes a day 70 cigarettes a day a heavy smoker can i call you back in five minutes i'm so breathless just from having a conversation that's the sort of thing you want to get into it's quite bizarre so it's the exact opposite of your life insurance conversation so you shouldn't hide the aches and pains the conditions or the bad habits exactly very important so smoking if you went 10 a day smoker something like that that's an increase of about 15 on that on that base rate that i just gave you that 7.7 so it's a lot of money it pays to smoke in that sense finally we're onto something can you get an annuity right now with a chicken dinner do they check it like you know if you're doing your your insurance for your life insurance like okay i don't smoke and then they realize you're smoking and you can't get your money do they check that you actually do smoke or that you actually don't go to go to your gym like i saw you in the gym you said you don't even know where the gym is you liar so um yeah can they do they actually they do yeah so they'll walk happen quite frequently actually it's about i don't know if i should say the number but about one in three check about one in three so they'll go to the gp and go this is the information we provided can you validate it every so often there's an awkward conversation with the doctor and sort of said, I did tell you I gave up smoking.

7:25I am still smoking. And then they'll do a quick nicotine check and they'll confirm that they are smoking. So that will happen every so often. The other thing that's happened actually this year, it's quite funny. Husband was on the phone, quotes were produced, went away. Husband called back up in about 10 minutes when I'm really sorry my wife was with me. I told her that I quit smoking. I am still smoking. Can you redo the figures for me? It's really quite bizarre because people are a little bit ashamed of these things. A lot of people can relate to that. You're always trying to put your best foot forward for people.

7:54Yeah. And I think you also have some really difficult conversations. So many moons ago, I was an annuity specialist. I was helping people before pension freedom. So basically, most people were purchasing an annuity. The severe case of diabetes, there was insulin, there was amputation involved. It was a pot of about£20 ,000. And he was getting just over£5 ,000 a year. And you don't have to be very quick with the maths to go, oh. They think you're going to die quite soon. Yeah, exactly. So what happens if you, because it's meant to be guaranteed for the rest of your life. What if you live like 10 years and they thought you're going to live four years?

8:27You win that gamble. So you still get paid every year. It's literally like taking a bet, isn't it? And you're the other side of the bet. And if they come back, if you go, I've got 100 grand, they go, we'll give you 50 grand a year. They're basically saying you're dead in two years. That's it, yeah. So it's almost like, and I'm guessing you're pretty sophisticated in your assessment of life expectancy. You've got a lot of data points. Loads of data points. And what's really important as well is its scoring system. So even if you go, okay, I'm just going to tell you I'm a little bit overweight and then I'm taking a tablet for a cymbistatin or cholesterol, this sort of side of things.

8:59Most people do as they get older, even if they're preventative, they add up on the underwriting scoring. So very quickly, a couple of minor things still get you extra income, not just for one year, for every year for the rest of your life. And this is what's quite important. If it was me, maybe I'm going to start being a little bit more unhealthy going after retirement, get my annuity and then go on that massive health kick. It's the way to game it. Six months before you go to your doctor, you'll be like, I just can't put down the fags. I've been speaking. Just do all-nighters for like a year.

9:31Just every night on it. That's pretty good the first year of retirement. Just go hard. Just go big. Yeah, just go really big. But that is fascinating because it's so counterintuitive to what we all expect. It's almost good to show them warts and all. Yeah, it's so important because like I say, it's individual. So ignore that initial sort of quote that I've given you. That should be your base point. Then get a quote for you and your health, your lifestyle, because that really matters. Okay. You talked about the pension freedom legislation there. I believe it was 2014. Is that correct? So yeah, George Osborne stood up on 2014 and it came into effect 2015.

10:06There we go. So he came out and he basically gave people more freedoms. Yes. Prior to that, did you have to buy an annuity with a defined contribution pension part? Is that correct? So you didn't absolutely have to. There was other options available, but all the frameworks very much made it quite tricky for you. So the vast majority, 90 plus percent of people, were having to buy an annuity. Why do you think they made that decision at the time? And do you think it was a good decision? I'll do the second question first. I think it was a good decision because who wants to be forced into a product they don't want?

10:39It doesn't make any sense. Especially because rates dropped and stuff after. In hindsight, they became very, not as valuable, did they? Pretty much straight after. Yeah, straight after because obviously competition in the market fell away. So there was a lot fewer annuity providers in the market. So that impacts rates as well. I think the other main point is that they're buying really small annuities. I know people with an annuity paying one pound something a month. What can they do with that money? It wasn't working very well. So I think, one, it was a very good thing to do it because it gives people choice.

11:13It's their pension savings. It's their money. They should choose what they're going to do with it. I think that's a positive thing. Two, on the other side of the coin, it hasn't done too much harm to HMT. The Treasury and the Taxman, the amount of income that they're picking up now, is not a bad thing from a government point of view. Because people are ripping the money out of their pensions and it's getting taxed. Exactly that. Yeah. Do you think, though, there's an argument as well that they gave people too much control over... I mean, so coming from a different angle, I used to sell investment properties in a former life.

11:45And I'd often encounter people where we were trying to sell them an off-plan development in Manchester. And they were like, oh, no, I'm going to buy this parking space in Dubai. And that might have done okay. But I was like, you're taking all the money out of your pension to buy a parking space in a foreign country. And I saw a lot of that. And you still get that in pensions now. You still get a fair few sips in these sort of investments. And yeah, people are taking a risk. There is that side of things. So if people are taking all of their pension pot, especially if they're still working. So it's that tax consequence.

12:17If you're still working, it's taxable income in that tax year. So even if, to some people, a modest pension of, say,$20 ,000, all of a sudden that's 25 % tax-free. That$15 ,000 is going to be taxable income that tax year. It's going to push a lot of people into a higher tax bracket for that year. That's something really worth considering. And then can they manage that money for the rest of their life? And this is why a lot of people like to go for an annuity, just purely because it's taking care of them. It's all done. I'm going to get X amount of income, like a salary, for the rest of my life.

12:50And it's done. Sorted. I think the one thing that has maybe become attractive to me, like you say, is it doesn't have to be everything. It can be a portion. and you could maybe say my fixed costs or the heating and the lights and the food is 10 grand a year i'm going to get an annuity for that and then the rest kind of reduces market risk and volatility within the portfolio i'm a huge fan of things like the plsa retirement living standards yeah so that minimum retirement living standard if you're taking the full new state pension and you use 23 000 last time i looked of a pension pot to purchase an annuity with escalation so three percent each year so you've got a little bit of inflation protection yeah exactly yeah then that will get you that minimum retirement living standard for the rest of your life guaranteed so you get state pension and a 20 grand pension pot to buy an annuity that grows by three percent a year and that gives you the minimum as it currently is today 20 grand yeah so you're not talking big numbers i thought you were going to come in and be like 200 grand 300 grand you know these kind of so you think that people could go they can kind of take a view if they haven't got much in pension savings and say i can at least get some guarantee of quality of life that is inflation linked as well which is big yeah it's so important because especially if you are accessing and there's a big gap since pension freedoms there's access point which there's a lot of people accessing their pension taking their tax-free cash at 55 to 60 and then there's the pension income stage which is happening much later on in the journey so 65 to 70 that you really need to start thinking about it and that flexibility and if life expectancy keeps increasing which is currently mid-80s to buy an annuity at age 65 you've got 20 years of income in theory there and what you're selecting at the age 65 to last for 20 years it's a big decision those options that you're choosing you need a crystal ball almost to get it right what what age do most people buy annuities yes 65 is that popular age there's a a good sort of bit of industry thinking that you want to purchase annuity a little bit later in life.

14:53That's because you're taking that pot of money and you're fixing it. Because you're likely to die sooner, so you guys make a bit more money. Yeah. Yeah, I'll say that. Buy it when you're 89. Give us a meal. We'll sort you out for the rest of your life. It's all commercial reasons. It's because when you think about it, when you're a little bit younger, you want that flexibility. So you might want to access your pension pot. Hence why most people are going to draw down at that sort of age, because you've got the flexibility. and there's a lot longer time there for investment exposure when you're a little bit older cognitive decline things might be a little bit more settled so a lot of people are looking at purchasing annuity between 75 and 80 like care costs and things like this yeah you know to cover those because the big question mark is how long do you live because like the care costs are so high it's assuming you go into a care home yeah 800 pound a week a thousand pound a week it's like I might have enough money if I live for five years.

15:48I might not if I'm 10. I might even live for 15 or 20. And no one wants to die, right? But I guess with an annuity, you could go, well, at least I know I can live in that care home forever, essentially. Yeah, that's it. It's getting a known quantity of income. So whatever that income is, as long as you've got the funds to support it and the rates are there, you want to secure, lock it in, known, sorted. So wait off everyone's mind. And we were just discussing it before we started recording. Things are quite uncertain right now. so when things are uncertain people look for certainty that's what an annuity can provide could i buy one at 40 no so it's minimum age 55 currently moving to 57 okay so it's tied to the access of pensions correct so if you're a billionaire and you're just like i just want to lock in a guaranteed income for life you can't buy one at 40 no unless you've got those wonderful exemptions like you're a sports star and and everything else so they can buy annuities yeah so they can they can access the pension earlier as well for example how about social media i was about to say what about youtubers you're far too famous you're not allowed we've been looking for annuity haven't we get rid of this guy no um that's interesting with the footballers yeah so they can access their pension sooner yeah yeah how much can they stick into a pension as much as much the like i mean i can't for data protection reasons but i know some some very high profile footballers with with annuities that we've supported but but i mean like you know a footballer you say they access their pension do they have pension rules outside of the the ones we do as well as in they can pay more than 60k a year into a pension i would say no from a tax point of view they're the same but the exemptions are very much on the access points they can access much younger yeah just mean because if they max it from 20 to 30 60k a year they can access it in their mid-30s it's not going to be yeah they're going to spend all of that before they get to retirement yeah well with an oce they don't do that so keep going out do a lot of footballers do that it seems like a like a cheat code because if you're getting paid like a mill a week or half a mill a week or something and you start again in the UOT and then even like break my leg while i retire i'm set for the rest of my life yeah there's like i say we've had experience with footballers definitely going down that route and you can understand why yeah of course i mean it's pretty sensible in a way it's kind of i don't think many footballers think like that do they no well to be fair this is a financial advisor on behalf of the footballer which is slightly different yeah yeah yeah how do you I mean how long do footballers live for like Ronaldinho is doing his best to just hit the dirt isn't he what about Pelé yeah exactly exactly it depends on your lifestyle yeah or then you get like a James Milner who just like goes forever you know what I mean you don't want to insure him yeah Milner will get in a much lower rate yeah you get quite a week Milner he'll be struggling he's not getting 5 % in the year he's struggling he's like I smoke 50 a day he's like you sure about that maradona that would have been very interesting to see what he would have been getting towards his later years that would be very different yeah okay can we talk about the the different types of annuity then because it's it's not just one type what from the research i found that they're pretty complicated there's a lot of different types yeah so high level we've got the lifetime annuity so when you've got the lifetime annuity exactly what it says on the tin you fix it in that's for life but then you've got all the options so joint life i a percentage of that income goes to a spouse on death so if it's me i went joint life 100 what i'm saying there is 100 of the income continues to my spouse in the event of my death so you look at those sort of things so you could go 70 so if i die the partner gets 70 of the income correct and that would make the annuita cheaper to buy because it's less cover right than 100 correct yeah yeah is it more expensive yeah exactly so you can do any percentage between literally one to a hundred 1 % have a little taste have a touch feels like you're sending a message at that point can I do 0.1 % is that an option it's so funny as well because most husbands that we go through they go no she's fine she's sorted she's sorted so many people if I die she's alright yeah no this is just for me she's got the house she's got all of this it's fine wow but whereas typically wives when they get on the phone like oh no I would like to secure a little bit in the event of an early death because that's one of the things that I think annuities can get a bad press for.

20:06I've locked in this set amount of income and I die after two years. That's a bad outcome. I've had two years of income. The rest of it, the annuity provider's kept. Last time we recorded, Tamein, you were having some real dramas with your accountant. So how's that been going, mate? They're sacked. So drama sorted. They're a big corporate firm. They didn't really reply to my emails very quickly, like took a week or two at times. and they charged me way too much. I mean, I've got pretty simple taxes and yeah, they were charging me thousands. They saved me some money, but yeah, I had to move on. Slow and expensive.

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22:52right but that provides everyone else with the higher rate like the seven yeah but you don't care about everyone else when it's your money this is on yeah but i mean yeah in theory i'm looking at it from like a whole market and i've given you like 200k and then i only get paid out like 20k for two years and then you're like oh everyone else gets it i'm like yeah but i've got a few more steps in shouldn't you you went too large in that actually yeah yeah that's you mate I want to be part of his pool yeah Dave was like I want it all you've been a boost to the average no okay so you've got you've got that sort of thing but you can also do options where you protect the capital so if I put£100 ,000 in I can go for an option known as value protection and if I die before I receive £100 ,000 back the difference so wherever it be say if I received £80 ,000 back that£20 ,000 will be paid to the beneficiary or estate so that just costs a little bit more and the other thing the most popular way of doing this is a guarantee period which basically means guarantees to pay out the income whether i'm alive or not so very popular is a five-year guarantee period which means the annuity income will be paid out for five years whether i'm alive or not and that's quite inexpensive it might cost something in the region of a couple pounds a month and then if you live for more than five years you still get your annuity as normal but your family you'll get it if you die within if you die then your family get the rest yeah yeah that's it and because you can have a guarantee period between sort of one year and 30 years while rates are where they're at here's a little bit of another cheat code for you bless you just trying to get the claim up yeah really sick look i'm so poorly sneezed at it's all on camera i'm logging it all get a fag out mate but you can get a guarantee period for a really long period of time so i looked at a quake today actually so it's 15 years so 15 year guarantee period that i've got notepad here 15 year guarantee but rate was um for 65 or 7.3 okay that's guaranteed to pay out 109 000 whether i'm alive or not so if i live beyond those 15 years i'm still getting my seven or thousand pounds a year guaranteed if i haven't i've at least covered what i put in plus a little bit more for the estate and there's like whole life and then there's terms right so you could be like i just want it for 10 years or yeah so fixed term annuities i really like this product don't think a lot of people are fully aware of this product but people tend to use it in one of two ways so the first way is oh i like guarantees i like security however i don't want to lock in for life I'm just not ready for that so what you can do is take a fixed term annuity anywhere between three years and 20 years I think might actually be 25 years and just say okay I want a set amount of income for this period of time and if there's enough left over the annuity provider says this amount is guaranteed to be returned to you at the end of that term so again you know just so we've got some upstate figures or all change but if I said okay I've got 100 ,000 pounds I would like about the same as a lifetime annuity, a little bit more.

26:04So give me£8 ,000 a year for five years. I get my£8 ,000 for five years. At the end of the fifth year, the annuity provider, the best annuity provider I saw, was going to return just over£82 ,000 to me. So over that five-year period, the total return is about£122 ,000,£123 ,000. So that's a really nice way of people getting that security through the guaranteed element of the annuity but what this product gives you which the lifetime product doesn't give you is some investment return and some flexibility so i could break out of the fixed term product i can't have a lifetime product so it gives you a lot more flexibility than that lifetime product if you break out i assume you've got penalties so what they do is they recalculate on rates at that time okay so you're likely to lose a little bit but everything i've seen is hundreds of pounds difference not thousands of pounds difference so it is quite worth having a look and the other way people are using it is as a bridging pension so what i see quite a lot to stay or whatever yeah or like if you're in the nhs and you've got like a db scheme exactly so a lot of people say i've got a small workplace schemes whatever it is i want to reduce my hours i'm 63 now very popular is fixed to do this i'm 63 now and I just want something to stop working or reduce my hours until my state pension kicks in so I'm looking for this 10 000 pounds ish a year and then my state pension will take over so it enables people to sort their life out actually retire a little bit earlier reduce hours or stop working altogether it's a really nice way of doing it and then their db pension will kick in as well which is something that the cohort of retirees we're seeing this generation next generation can take full advantage of when we get there i don't know if we're going to be relying on our final salary pensions quite so much so it'll be slightly different a lot more dc schemes exactly yeah and then there's also so paul tardley we had on who is the head of investment at nest yeah he talks about deferred annuities yeah so this is the idea of i'll have it in the future yeah so what what's this product and how might that be useful yeah so deferred annuities are fantastic in theory they seem to make an awful lot of sense it goes into what i was saying earlier so you want an annuity a little bit later in life when that uncertainty grows grows and grows and grows and the rates increase because the older they get the closer you are to death cheery subject i know but you're going to get higher income that way so what they do is they say right we're going to put away a proportional money now or we're going to drip feed a bit of money in and then we're going to buy an annuity at a set point in time to try and stop you running out of money in essence because that's the danger of drawdown is you keep withdrawing withdrawing withdrawing the investment return isn't quite where you want it to be oh no I'm 85 and I'm still alive and I've got no money other than relying on the state that's not very comfortable for anyone so what it doesn't say right at this point in time we're going to take this pot of money and purchase an annuity for you so you've got that later life security so it works well what I would say is if you're locking into a rate 10 years before you get it you're taking a gamble you don't know what rates going to be and as i said earlier health wise if you're in much poorer health at the age of 80 than you were when you're 65 are you getting the best rate so that's something really for these designs to think about because they don't want to give poor value for money if you can just buy an annuity live at that time and get a better rate you could have waited and they'd be like, okay, well, you're very ill now.

29:46In your 60s, you might look great. Yeah, exactly. You got a worse rate. But at the same time, I do see this benefit of going, my care is taken care of. I'm just going to spend my money now. Yeah. And that's what I'm saying. Some people really do just like certainty. This is where the product comes into its own. There's no other product out there that can guarantee you'd like an annuity. I take the issue when people say it's risk-free because nothing's risk-free because ultimately you're locking away quite a large sum of money typically. And that's it for life. You could die, you could not die.

30:19All these factors are unknown. There's so much unknown in that long period of time. Whereas the thing that you are locking into is basically the rate. It's just the income. That's what you're locking into for life. Everything else is still uncontrollable. In terms of the risk then, And what about the risk of the annuity provider going under over the time period? And what happens there? What protections are there for people if you go bust? Yeah. You're a broker, aren't you? Yeah, yeah. The people that you refer to. Yeah, so they're all the standard financial services compensation scheme, 100 % protection.

30:54Up to 85K, is that then? Yeah, it's up to the 85 ,000. But typically, like I say, they're always going to pay out with the annuity. There's going to be no concerns there. I've not had an annuity provider go bust in our time. You've not had one go bust. Let's say I've got a million quid to put into an annuity. Would it make sense then to spread it across 10 different providers? No, no, no. So even under the FSCS, I know the investment limits 85 ,000, but the annuity income is always 100 % protected. Oh, so your income is protected. Correct, yeah. So just to be clear, the income is in the amount that you were promised, you will get that under the financial services compensation scheme if the annuity provider goes bust.

31:35Correct, yeah. That's awesome. That's interesting, yeah. What about the ones where there's lump sums at the end, though, and they're promised back? Yeah, that's the same. So that one's under drawdown rules. So that one falls much more into the 85 ,000 category, whereas the lifetime, it's the income that's being protected. Yeah, I guess it's kind of, you can't just say to someone, oh, well, sorry. You're not getting that. Here's your 85K, and it's like I gave them 2 million quid, and that was my whole retirement. I guess you can't turn your back on people at that point. No. especially again older cohorts of people isn't it this is what they're relying on they've still typically they've stopped working they're not going to go and uh get work again but you find that annuity providers don't go bust i've never not not not in my experience and and who are they are they big insurers are like xeric and people like that is or are they specialized annuity companies no so there's a couple of specialist ones but typically it's all the people you know it's your leaker in general's your aviva yeah it's all your household names but you've got specialist ones like Just.

32:37So Just are quite a competitive annuity provider. And quite often you'll get people go, who are Just? Not heard of Just. Is Zurich even an insurer or did I just make that up? It's a country of Switzerland. It's a city of Switzerland. I'm sure that's like an insurer. Yeah. They do the UK insurance. I knew it. I knew it. Don't worry about it. But yeah. They're not an annuity provider. They're not an annuity provider. Oh, okay. I was just saying, I don't know why they spun to my head. But yeah, so these are big institutional insurers. They're all the people. So typically, like I say, all the people that you think about for your home insurance, your life insurance, your car insurance, they're mainly on the panel.

33:15Okay, perfect. And I think another thing that we want to talk about is probably the fees that are involved. So we talked about the risk and they take the other side of the deal, but they take fees, don't they? So obviously that's tempering some of that risk on their side. All fact, it's the price. So this is the difficult thing. when you're going into say drawdown on investments you see that annual cost and it's there it's quite clear it's transparent whereas with the annuity it's not there it's all just wrapped up and you don't truly know what they're investing in so you don't see oh they've made x on my on my fund value you don't really get to see that and typically because you're dead you don't really care at that point to do that calculation so that's a bit of a difficulty what i would say is because as i said go and speak to annuity brokers, make sure you shop around on the open market.

34:06They typically get a percentage of the fund value that's being used to purchase the annuity. So really check out those costs, whether they're an advisor fee or a commission, check them out because I've seen some commission payments of 5 % of the net fund value or the purchase price, which is, yeah, that would be a red light for me. I wouldn't go near that. expect something between 1.5 and 3%. And who's getting that? The broker? The broker would get that. And that will be coming off from the annuity income typically. So when you're going for advice, it might come off the pension fund. So you might be charged 1 % and 1 % will be taken off the pension fund and then you're starting with a slightly lower fund value.

34:50Whereas with commission, that tends to come off the annuity income. so if that commission was lower the annual income would be higher so if you're purchasing an annuity with a hundred thousand pounds if the commission was one percent so that's a thousand pounds that annuity provoke brokers going to receive it's three percent three thousand pounds and that's taken off the annuity rate whereas if you were doing it through advice actually 99 one in the one percent example 99 000 pounds would go in to purchase the annuity or 97 000 pounds were going to purchase the annuity so again it impacts the annuity income you're receiving right because you're either starting with lower or they're taking a little percentage off for a little bit off your income to pay the commission to the annuity broker so it balances out but they're the two ways that the costs are there if you die sooner sorry but if you die sooner in that example does they do they get less money then no callback if you live longer yeah do they get more no no is it will at some point then will the income kick up slightly because you paid the fees or No, no, it's just completely set.

35:53So it's all done from the outset. Right, okay. So just watch out for that when people get annuity quotes. Is there like a compare the market for annuity providers or do they go and talk to a broker like you? Because brokers have fees as well, right? So how do you compare lots of different providers? Yeah, so there's lots of annuity brokers out there. Naturally, I'm going to say use ours. But there's lots out there. So, you know, your hard-reads. You can say the name if you like. Yeah, I was about to say, what's yours called? You take your man, Mr. Plugin. We won't give you many, so you're going to take it out.

36:22I'm allowed to do the plug-in. So retirement line, so go on retirement line, and they'll compare the market for annuities. So they'll go through everyone on the open market, and they'll just list in highest income order to lowest income order. And like I said earlier, there's a big difference. So on average, about 15 % between the bottom offering and the highest offering. So there's an awful lot of people, roughly 40 % in the last FCA data, shows that they went with the existing pension provider. so they've got their pack in the post and they said would you like an annuity from us and sign here and they say sign here and they're lovely thank you ever so much but they could miss out now on quite a lot of income it's like going with your bank for a mortgage yeah you shop around because the rates can vary quite a lot yeah i mean inertia is a powerful powerful tool right but it could cost you like i say with an annuity it's not just one year every year for the rest of your life you're missing out on that income so it's really worthwhile shopping around can people shop around without the help of a broker they can so you can go on money helper the pension wise service and go on there you can't transats through there but they have got a hold of open market portal so you can do some shopping around and get an idea of what's going on so when i bought um life insurance what became clear was that it's not just about price it's about the t's and c's to make sure that these things actually pay out so more like the life he's dead you know they pay Yeah, but things like critical illness and other covers that are a bit more nuanced and you might want certain levels of cover or certain circumstances.

37:51And I did find a broker useful in that setting because they have that experience. Is it the same with an annuity or could someone theoretically go, you know, I just want something to pay X amount. Let's go find the best price for that. So I would say it's a lot more of an equal playing field just purely because all the protections are the same, all the annuity options are the same. I would say is people would probably benefit by speaking to an annuity broker to make sure they've understood the options correctly and it matches their wants and needs. And the other point is that health and lifestyle point.

38:22I think it's so important because we don't do it every day, right? So you're going to put in any medication or this is my occupation. It doesn't matter. I'll just put in engineer. On our system, if you're going to put in engineer, there's about 75 different engineers and they all impact life expectancy. Yeah. So it really matters to have that conversation and make sure you've got it right. It costs you nothing to get the quotes or have the conversation with an annuity broker. So go and have that conversation and get the quotes, even if it's just as a soundcheck. And I think that's where annuities are really useful.