Advisers want stronger stance on the open market option
The open market option is applicable to retirees with a pension fund to be used to buy a pension annuity. It allows them to shop around for the best annuity rates from all annuity providers in the market. This is best done via a ‘middle man’, an independent financial adviser (IFA).
Results of the Financial Services Authority’s (FSA) thematic work on open market options is a step in the right direction, but the message must be stronger if consumers are to benefit from the highest level of retirement income, their pension annuity income, when they come to retire.
Literature from life companies is unclear regarding the open market option. Consumers should be in no doubt that they have a choice of pension annuity providers and therefore a choice of annuity rates and how much they could increase their retirement income. One option is to force life companies to include open market pension annuity rates on the quote allowing clients to compare differences in income.
The open market opition should be up front and in bold. Some documentation is so unclear it probably doesn’t meet the FSA’s Treating Customers Fairly (TCF) initiative. Factors such as health or even where the client lives (postcode rated pension annuities) must be considered. Impaired life annuities or enhanced annuities can significantly increase income. There are other things to consider such as death guarantees, inflation increases and widows pensions.
Only by taking independent financial advice will a person on the point of retirement be sure they are making the right decision and receiving the best available income. So make sure you take proper advice when purchasing your pension annuity.
