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How to compare annuity providers


maximise your retirement income

annuities retirement

Most of us will not really start to think about our retirement income until we are close to the date we plan to retire from work. Even less of us will be familiar with the various financial options that are available to us when we retire. For those of us who are not fortunate to benefit from a final salary pension, the most suitable option is more than likely to be purchasing an annuity.

What is annuity?

An annuity is a form of insurance whereby an individual’s pension fund is exchanged for regular annual payments, usually until the time they pass away. In most cases, whoever you buy your annuity from will release 25% of your pension fund as a tax free lump sum at the time of purchase.

The amount of money you will get in annual payments from the remaining pension pot depends on a number of factors including:-

-Your age
-Your health
-Your location
-The size of your fund (savings)
-The type of annuity you buy

The Open Market Option (OMO)

There are several annuity providers in the UK, including a number of the major insurance companies. However not all providers offer the same annuity products or indeed the same annuity rates. This means that it is vital you shop around between providers to see which pension annuity provider has the best deal. This is known as the Open Market Option. By comparing providers, you could increase your retirement income by as much as 40%, should you be eligible for an enhanced annuity.

What is an enhanced annuity?

Enhanced annuities are offered to those retirees who have a medical condition or lifestyle choice which is likely to impact adversely on their life expectancy. So if you suffer from any present or past medical conditions or if you drink/smoke on a regular basis, you could be entitled to a much higher annuity income. This is because the annuity provider calculates that you are likely to die sooner than someone who is in good health, and thus they will have to pay out income for a shorter number of years.

How much extra income can I get?

This really depends on the individual, for more serious medical conditions such as heart attack or stroke, the increase can be as high as 40%. However there are over 1,500 individual medical conditions, which can qualify a person for annuity enhancement.

However, as mentioned, not all providers offer enhanced annuities, so you can only be sure you are getting the best deal by shopping around. Unfortunately in the UK, around 65% of annuitants accept the first offer from their existing pension provider and do not use the Open Market Option. This is despite estimates that more than half of them could be eligible for higher rates. Moreover, once an annuity is purchased it cannot be altered, so it is vital you make the right choice first time.

Top tips for buying an annuity

Read thoroughly your pension ‘wake up’ pack sent by your current provider 6 months prior to your planned retirement date.

Compare providers by speaking to an annuity specialists or annuity broker.

• If you are unsure as to the best way to proceed seek advice from a Financial Services Authority (FSA) approved Independent Financial Advisor. These can be costly so be sure to check charges beforehand.

Following changes introduced in April 2015, in the UK you now have more choice and flexibility than ever before over how and when you can take money from your pension pot.  The Money Advice Service has a very clear and concise article on all the options now available for using your pension pot.


This website endeavours to provide general information in relation to various financial products. We hope you find this information useful. In no circumstances should the information we provide be construed as Hints and Things providing you with specific advice in relation to your own circumstances, or on the suitability for you personally, of any advice, product or service referred to in this article.


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