With rates predicted to fall for the rest of 2010, now it is more important than ever that you get the best annuity rates. This can only be done by shopping around between annuity providers for the best deal, known as using the Open Market Option (OMO). Staggeringly, most people do not shop around, which means most people are not offered the best rates available. This scandalous situation is allowed to continue as those who are looking for an annuity are more often than not unaware that they must shop around to get the best rates.
So while we are used to comparing other financial products such as mortgages, loans, credit cards etc…because of the lack of understanding and complexities associated with an annuity purchase, most retirees end up sticking with the first offer from their incumbent pension provider. In many instances this suits the provider just fine as they do not have to asses the annuitant for for possible enhancements which would mean paying out a higher rate.
The P.I.C.A have suggested that this situation could be improved if there was a ‘pension passport‘ system where some brief details of each potential annuitant could be documented and then that person could more easily shop between providers. However, the real reforms many in the annuity industry crave have yet to surface from Whitehall, with the government instead focusing on making the pension rules more flexible by abolishing the annuity age limit. This means that we are all still relying on the initiative of each individual to be savvy enough to compare rival annuity providers. Until the OMO is made the default position for all annuitants, thousands of pounds worth of potential retirement income will go unclaimed each year.
