Open Market Option

updated: January 22, 2010

Would it surprise you to know that two thirds of people who have taken the trouble to build up a private pension fund throw away part of the guaranteed income that it can produce for the rest of their lives when they retire?

In fact, even of those who do make use of the ‘open market option’, many do not realise that they could qualify for an ‘enhanced’ annuity because of their health or lifestyle.

When you reach the retirement age specified under your personal pension plan or its predecessor, the retirement annuity contract, the pensions provider will write to you offering various ‘annuity’ options.

One of the options that will be referred to in the pensions provider’s letter is the ‘open market option’. This is simply your ability to purchase your annuity from a different pensions provider to the one you have used to build up your pension fund. Using the open market option will more often than not lead to an increase in your annuity.

It is not a complicated procedure to make use of the open market option. You simply contact your independent financial adviser (IFA) and let him or her have sight of the annuity offer from the pensions provider. If you do not have an IFA you could visit the websites of IFA Promotion (www.ifap.org.uk) or the Personal Finance Society (www.thepfs.org), or the Institute of Financial Planning (www.financialplanning.org.uk) or simply ask us for advice as we are on all of these lists!

To obtain further information please click here for our pdf Guide to the Open Market Option.