Open Market Option
What is the Open Market Option?
The open market option is the means by which you can compare annuity providers to find the best annuity deals in the UK. Once an annuity has been purchased it cannot be switched, so finding the best deal is important to ensure you do not miss out on any income for you and your family.
An annuity will allow you to release 25% of your pension fund tax free as a lump sum at the time of purchase. The rest is then paid in monthly payments which are guaranteed for the entirety of your retirement until death. They provide a secure and dependable income, which will allow you to plan and enjoy your retirement.
Couples and the Open Market Option
A single life annuity will pay a greater income than a joint-life annuity, although if you pass away your income will not be passed to your partner. If you wish your income to be passed to your partner if you pass away first then you should opt for a joint-life annuity. You can stipulate the percentage of your income you wish to be transferred from 20% to 100%. The more you wish to transfer, the lower the starting payments will be.
Guaranteed annuities allow you to guarantee your annuity payments for a specified numbers of years after your death. Typically a couple may take out a five year guarantee – so if you pass away two years into your single-life annuity, payments would be made for three additional years. As with all annuities, rates and products vary between providers, so make sure you shop around for the best deal.
Money back annuities
Under this type of annuity your partner will receive the remaining sum of your pension fund which has not already been paid out in annuity income. This is also known as annuity protection, but is not available from all providers, so check when you are comparing the market.
Protecting your spending power in the future
Although an annuity pays you a guaranteed income for life, unless you choose otherwise, the amount that you will receive will remain the same every year until you pass away. Should you be lucky enough to enjoy a long retirement, you will find what you receive in the later years is worth much less in real terms than at the start because of inflation.
There are two options here. You can opt for an escalating annuity whereby you can choose the percentage amount you would like your income to increase by each year. The other option is to opt for an index linked annuity, which pegs the percentage increase to the RPI (Retail Prices Index). Again with both these choices your starting income will be lower compared with a level annuity.