The Open Market Option is a feature of most pension contracts, although some very old pension contracts may not have this feature. It is without doubt, the most important feature when approaching retirement because without it you would be stuck with buying an annuity from your pension provider; what incentive would there be for them to offer the most competitive rate if you cannot shop around?
Unbelievably, many people do not take up the Open Market Option, they simply take what is offered to them. Maybe they don’t realise they can shop around or they are not aware that the pension has to be converted to annuity or they simply can’t be bothered; either way, it means that some pension providers get their annuity business by default and therefore don’t have to be competitive.
Choosing an annuity may not be as easy as you might think. For some people an annuity may not be the best option at this time, an alternative means of providing an income could be more suitable, e.g. drawdown, investment linked or a term annuity. Furthermore, there are many features of an annuity that may or may not be applicable to you. What we’re saying is that it may be prudent to seek advice from a professional, we can put you in touch with an annuity adviser if you choose.