You don’t have to accept the annuity that your pension provider or pension scheme offers you. You have the option to shop around to find an insurance company or pension provider who will offer you a better rate.
Shopping around for an annuity
When you approach your selected retirement age or notify your pension provider that you want to start drawing your retirement benefits, they will normally send you details of the annuity they would provide if you purchase it from them.
However, you don’t have to buy your annuity from your existing pension provider. Instead you have the right to shop around for a better deal. This is called the open market option or OMO. We have a spotlight on this, if you'd like to read it please click here.
You should not underestimate the importance of shopping around to find the best annuity rate. The rates you are offered by different annuity providers can vary dramatically and once you have made your choice, it can be extremely difficult and often impossible to change your mind.
Some insurance companies/annuity providers specialise in certain areas, such as enhanced annuities, impaired life annuities and/ or investment-linked annuities, some may take where you live into account, others may only offer standard (or conventional) annuities.
If you’re thinking of buying your annuity from a different provider to your current pension provider, check first whether your current provider will charge any penalties to your pension fund for moving to a different provider – this could affect the level of income you could receive.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.