It is staggering to think that so many UK retirees do not shop around at retirement, instead hundreds of thousands just accept the pension annuity they are first offered. How many of these retirees would accept the first quote they were offered for their car insurance? Not many. The open market option is basically the right to shop around to find the best pension annuity rates from the entire market. What many retirees do not realise, and this is the same with any financial product, is that there are huge differences between the annuity rates from one company to another. The difference in rate can be as much as 20% from the top rate to the bottom rate, if you are saving with the pension provider with the bottom rate and you accept their pension annuity offer then you will be 20% worse off this year and every single year of your retirement. The other important feature of the open market option is that you may also find out that you qualify for enhanced pension annuity rates, these rates are given to those that have shorter than average life expectancy, because they have lifestyle habits such as smoking or medical conditions such as high blood pressure or high cholesterol. These rates can be as much as 40% higher than standard rates for the more severe conditions and it is quite common to see rates higher by 15% for just smokers. It definitely pays to look at the open market option. It costs nothing to look at the open market option to find the best pension annuity rates, you may even find that actually your pension provider has the best rates after all, but unless you first look at the open market option you will never know. The easiest way to take advantage of the potentially higher pension annuity rates is to seek independent financial advice from a pension annuity specialist, these advisers have access to providers that do not sell to consumers. The advisers will also ask you questions about your planned retirement objectives and then choose an annuity from the range on offer, there are lifetime annuities, fixed term annuities, asset-backed annuities (investment linked and with-profit linked) and also another option that may be suitable for those with larger funds or pensions elsewhere is income drawdown. So it really does pay to seek proper advice to ensure you get a chance to review all the options available to you.
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