Are you tired of hearing how tough it is for those approaching retirement? Or maybe you're starting to look into your options for when you stop work? The potential for turning a pension fund into a sizable pension income seems to be ever dwindling as annuity rates plunge amid economic turmoil that stretches far beyond the retirement market.
Annuity
In tough times shopping around can get you a better deal just when you need it most. Exercising your 'open market' option is now more important than ever.
What is the open market option?
Surprisingly, the open market option was introduced as far back the mid 1970s, giving some pension fund holders the right to shop around and compare the market rather than automatically having to take the annuity offered to them by their pension plan provider.
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Nowadays, you have the right to take the open market option in the majority of cases and taking a look at what's available can have major benefits, yet many of those reaching retirement still accept the first deal they are offered by their pension provider.
Choosing the open market option doesn't mean that you can't go for the annuity offered by your pension plan provider, it just means that you look around first to make sure that they are offering you the most competitive deal that is tailored to your needs and circumstances. You could end up with a much better deal if you go elsewhere, or maybe not, but you won't know unless you shop around.
Annuity Income
Many pension plan providers will simply offer you their standard annuity deal by default, but there are specialist annuities on the market, which, depending on your circumstances, could earn you a better rate. These include:
Enhanced/critical illness annuity: If you suffer from ill health or are a smoker then a enhanced annuity could get you up to 40% more on your basic annuity rate, depending on the seriousness of your condition.
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Joint life annuity: If you are married or in a civil partnership you may be eligible for a joint annuity. This type of annuity will continue to pay out even after the first partner has passed, until the death of the second partner. Such an annuity can sometimes prove a better and more cost effective deal than purchasing two separate annuities and can give you piece of mind knowing that your partner will retain an income even after you have passed away.
If you're considering applying for an enhanced annuity then don't be shy about detailing you ill-health- it's one of the very few times illness will work in your favour, so don't be afraid to make the most of a better rate because of it.
Annuity Products
Purchasing an annuity is a big decision, so it is important to get it just right for your own individual circumstances, use the open market option to make sure that the deal you're getting is the best that's available. If you are unsure about your options, you may want to speak to an independent annuity advisor who can offer impartial advice on finding the best annuity rate with you.
John T Hughes writes for Annuites Rates [http://www.annuitiesrates.co.uk], a site that connects consumers to annuities advice they can trust.
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