Annuity Open Market Option Helps Uk Retirees To Obtain More Retirement Income

By Author: Thomson
Total Articles: 147
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Many United Kingdom citizens who are due to retire are not aware that they are under no obligation to remain with the fund provider with whom they have been saving for their pension. Often it is possible to obtain a better annuity rate by shopping around using the open market option. It can also be beneficial for those who have several small pension funds, to combine them into a larger fund when buying an annuity. When comparing the annuity rates offered by several life assurance firms, it should be borne in mind that the features and benefits may differ from provider to provider.

Many people in the UK save for their retirement through private pension schemes, or through defined contribution company pension schemes. Unlike a final salary scheme, the value of the pension is not guaranteed for these schemes, but depends on the performance of the markets. Normally when a person is about to retire they will take the money accrued in their pension fund, and buy an annuity from a life assurance company.

An annuity is a form of insurance, called longevity insurance, and it guarantees to pay the pensioner a fixed sum ...
... (or an inflation proofed sum) for the rest of his or her life. The insurance element comes from the fact that the life assurance company assumes the risk that the pensioner may survive for a long time. If that happens, then the pension will continue to be paid.

Clearly this is better than having long lived pensioners put into the position that their pensions run out of money, and it is in fact compulsory for the pension fund to be used to purchase an annuity before the age of 75. The earliest allowed age is 55.

When a worker is coming up to retirement they will receive an offer of an annuity rate from the company with whom they are saving for their retirement. Many accept this offer, and are not aware that they are perfectly entitled to take their pension fund and shop around for a better offer, using the so-called open market option.

The annuity market can be quite competitive, and it has been reported that 40 per cent more retirement income could be obtained in some cases. It is also worth noting that those in poor health and smokers will often get more favourable annuity rates because they would not be expected to live for so long after retirement.

Another point to consider in the UK today, is that many workers will have been employed by several companies during their career. They may therefore have more than one pension fund. Combining the pension pots, and shopping around using the open market option can often boost income for these pensioners.

When comparing the annuity rates offered by several life assurance firms it should be borne in mind that the features and benefits may differ from provider to provider. For example some annuities may be inflation proofed, and some may be fixed, and the provision for a surviving spouse may be different. It is important to be clear about the requirements from the annuity, as once it has been purchased it can never be altered.

Annuity Supermarket is a leading online annuity portal and information site for those approaching retirement. Specialist annuity advicers will find you the best annuity rates using the open market option.