Today, when you reach retirement, you have options.
Gone are the days when you must take your pension on day one, regardless of annuity rates, the necessity for income or when you take your lump sum.
Many people retiring in the UK, including a handful of my clients over the past few months, will have received information about their pension fund from the provider, including details for buying annuity.
The provider's annuity offered, however, may not be competitive and an open market option could increase the annual pension income for the rest of the annuitant's life.
What is it?
An open market option means an annuitant is free to buy their annuity from any provider in the market.
Although every person retiring in the UK can consider an open market option, over two thirds still don’t shop around to find the best annuities.
Many people are wasting their chance to receive extra income, potentially worth thousands of pounds, every year for the rest of their lives.
Buying the right pension income is very important, as once bought, annuities cannot be switched to another provider, cannot be changed to a different type of annuity and cannot be altered in any way for the rest of the annuitant's life.
Once the capital from the pension fund has been spent on an annuity, there is no opportunity for any of this capital to go to a beneficiary on the death of the annuitant.
There is more to retirement planning than simple annuities.
These could be the features that can be added to annuities, whether an individual suffering from ill health is a smoker or is overweight could benefit from an enhanced or impaired life annuity.
Whether other options are more appropriate such as phased retirement of pension drawdown and how to select the best annuity rates offered by providers which can change from one week to the next depending on their income requirements.
It is important that if an individual is in any doubt when taking the open market option route, they must seek an annuity and pension bureau offering specialist advice from an independent financial adviser (IFA).
The advice given is paid for by the annuity provider as part of their distribution costs.