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Editor’s Note: This is a guest post by Eleanor Whitelee, a personal finance blogger from Kent, UK.
Annuity rates are falling. Unfortunately, that’s undeniable. However, rather than focusing on this in a negative light, what we really should be doing is to simply ensure that, whatever the rates are, we are getting the best financial deal for our pension funds.
The Open Market Option is the best way to do this. To explain it briefly, the Open Market Option is what gives you the right to shop around for the best deals. You no longer have to take the first annuity offered to you by your pension provider. You can now go through the entire market to find the best deal for your own personal circumstances. By doing so, you could increase your annuity income by up to £1000 per year. There is also the issue of enhanced annuities. It’s thought that anywhere from 40 to 60% of retirees could benefit from enhanced annuities, which offer a higher rate to people suffering from certain medical conditions or meeting certain criteria. Common examples of qualifying criteria are smoking (having smoked 10 or more cigarettes per day for at least ten years), having an unhealthy BMI or regularly exceeding the maximum recommended weekly alcohol unit intake. The reason that such criteria, as well as a whole host of medical conditions, can mean higher annuity rates is that rates are calculated based on your life expectancy, so if you have a condition or a lifestyle habit that might mean you do not live as long, the rates you receive will be higher. Without browsing the entire market, it is impossible to be sure that you are maximizing your pension fund and as annuities play such a vital role in your retirement finances, this can be critical to enhancing your lifestyle in your later years.
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