Pension Planning - Annuity Choices, Retirement Annuity and Comparison

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Annuity Choices and Comparison

Most pension schemes give you what is called an 'open market option'. This means you do not have to buy your annuity from the provider with whom you have built up your pension fund. Instead you can shop around for the providers offering the best rate. Annuities are sold by insurance companies.

Usually, it will be worth exercising your open market option. The difference between the best and worst providers can be hundreds of pounds of yearly pension.

If you are in poor health or a smoker, some companies are particularly worth looking at because they offer preferential rates (since you are not expected to live as long as someone in good health or a non-smoker).

You should be wary of exercising your open market option if the company with which you have built up your fund offers a guaranteed annuity rate which is higher than the rates generally available now, or would levy a hefty penalty charge if you switch.

You may be tempted just to choose the maximum possible pension from day one. However, this is not such a good idea. You need to look at how well your pension will continue to support you as retirement progresses and how to protect anyone who depends on you financially. Different types of annuity offer different features which can help you to meet these needs.