Buying a pension annuity:consider your options
People approaching retirement, with their pension pot ready to purchase a pension annuity, their retirement income, should be in no doubt that they have a choice of providers when it comes to purchasing an annuity. The message must be far stronger if consumers are to benefit from the highest possible level of retirement income under the Open Market Option.
The Open Market Option gives investors the opportunity to purchase their pension annuity from any annuity provider, regardless of where they have previously invested their pension. All the investor has to do is to find out which provider offers the best annuity rates and options for their circumstances and move their pension pot to that provider.
However, literature from life companies is not clear enough regarding the Open Market Option. Consumers should be in no doubt that they have a choice of annuity providers and by how much it could increase their retirement income….perhaps up to one-third depending on state of health.
Pension annuities are complex and consumers need to take advice if they are to receive the best deal. Factors such as health, or even where the client lives, must be considered as impaired life or postcode annuities can significantly increase income. There are other things to consider, such as death guarantees, inflation increases and widows pensions which will all affect the level of income paid. 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. This is the service available via this website.
Some thematic work on Open Market Options, recently carried out by the Financial Services Authority, is a step in the right direction, but more needs to be done.
One very strong option would be to force life companies to include open market rates on the quote allowing clients to compare different annuity rates and pension income. At the very least the Open Market Option should be up front and in bold. Some documentation is so unclear it probably wouldn’t be regarded as meeting the Financial Service Authority’s Treating Customers Fairly (TCF) initiative.
