The Open Market Option
As you approach retirement, you will probably have heard of the Open Market Option. It allows you complete flexibility to shop around and use your pension fund to provide you with retirement income from any provider you choose.
In the vast majority of cases, using your pension pot to fund your retirement will mean purchasing an annuity. However, two-thirds of people usually use their existing pension provider to purchase their annuity without examining their options. Studies have shown that you could receive up to 40% more income by obtaining financial advice and reviewing the market.
Remember that choosing an annuity is a once-in-a-lifetime decision that cannot be reversed and it is unlikely that your existing pension provider will offer you the best rate. Only by shopping around will you be able to make informed decisions about the best policies to suit you. Your existing pension provider cannot charge you for using the Open Market Option and most financial advisors will not charge for shopping around on your behalf.
Why Is It Important?
- Annuity rates can vary significantly and you could get up to 40% more income by shopping around.
- You can consider different types of annuity such as investment-linked annuities or fixed term annuities or you may find that income drawdown may be the best option for you.
- Once you purchase your annuity you probably won’t be able to change it for the rest of your life.
- It’s important that you ascertain whether you could qualify for an enhanced annuity which could provide significantly more income.