Tag Archives: Escalating Annuities

Save Thousands a Year by Using the Open Market Option!

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The open market option is the right of the consumer to shop around before choosing an annuity. An annuity cannot be changed or cancelled once it has been bought – so it is immensely important to choose correctly the first time around! After all, an annuity can have an impact on your financial security for the rest of your life, and is therefore one of the most significant financial investments in life.

Research shows that a huge proportion of people are not aware of the open market option and that many people still continue to commit to the first offer made to them by their existing pension provider. This is not to say that the offer made by your pension provider will not be competitive. But according to some research, shopping around could help you get up to 20% more income than your existing provider, depending on which annuity and provider you choose, and an impaired or enhanced annuity could mean getting up to 46% more! Using the Open Market Option and shopping around for the best annuity scheme can therefore help you to save thousands of pounds over the year and a vastly significant amount of money over time.

There are many different types of annuities and choosing the most suitable annuity can seem a bit daunting. This is probably why some people simply choose to stick with their existing pension provider for an annuity. But thanks to all the information, resources and tools available today, understanding the annuity market and making an informed choice is not difficult at all.

There are many comparison and advice websites out there which can offer objective information about different types of annuities. You can learn about fixed annuity options, variable annuity options, as well as different bells and whistles that you can choose to add to an annuity. You can also use online tools like the pension calculator, to work out the maximum income you can get for your pension savings lump sum. These free tools and resources can really help you make the best of the open market option. Most insurance companies and annuity providers also offer lots of information on their websites, as well as offering free instant quotes based on your individual case.

Shopping around and using the open market option has never been easier or more convenient than it is today, thanks to the wealth of resources and information available. If you need more help and guidance when choosing, you can also consult an independent financial advisor. In fact, for certain types of annuities, such as investment linked or escalating annuities, it is essential to take independent advice from an expert. An IFA can help you understand your own needs, different products and how they work, and ultimately make a considered decision.

Create Your Own Bespoke Annuity

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An annuity is a way to turn pension savings into regular usable income for the rest of your life, or for a pre agreed period of time. Usually, an annuity is bought with a lump sum from the pension pot, and the size of the lump sum will determine how much income you could get back from the annuity. But annuity income also depends on a number of other factors including age, gender, location, health, the kind of annuity you choose, and of course current annuity rates.

Your pension provider is obligated to make an annuity offer to you; however, you have the right to explore the open market before making a choice. This is known as the open market option and your pension provider is required to make you aware of this path. Shopping around for an Annuity can help you understand the various types of annuities that are available from a multitude of annuity providers.

For instance, there are fixed annuities that pay a fixed income for the entire term of the annuity, and variable annuities such as escalating or investment linked annuities where the income you receive from the annuity varies over time due to several external factors. While a fixed, stable, guaranteed income may work for some people, others may like to have income that is linked to inflation or income that is linked to an external investment product.

An annuity once purchased cannot be changed or cancelled so it is vital to shop around and find an annuity that is the best match for your individual circumstances and needs. It is also important to be aware that many annuities have additional bells and whistles that can be added to the product. For instance, some annuities have the option of adding features whereby your income will continue to be paid to your partner or beneficiaries for a certain fixed period even after you are gone.

You could protect your income from being eroded by inflation by adding an escalating feature, where the annuity payments increase by a certain percentage each year or by investing in an inflation linked annuity, where the payments depend on the Retail Price Index. Naturally, adding extra bells and whistles such as these will generally impact payments in the initial stage – so that, for example, an escalating annuity will pay less than a conventional level annuity at the start of the annuity.

It is important to understand the details of how the annuity works before investing. The key to getting the perfect annuity is to use different tools and options to make the annuity work for you, and to strike the right balance between the level of income you need immediately, and the level of income you would ideally like to receive in the future.