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Open Market Option

If you’re approaching your retirement, you may already have heard about OMOs, or open market options, but what does this refer to and what is its significance?

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About the OMO

It’s actually fairly simple. The Open Market Option lets you access your pension pot and take any retirement product from your provider of choice. It offers you total flexibility to choose exactly how you take your retirement income. In most cases, your retirement finance solution will be to buy a lifetime annuity. So in this instance, the Open Market Option refers to your freedom to shop around and seek the best available rate for your Annuity.

It is uncommon for you to find the best annuity rate with your current pension provider, so it is important to look at other providers and do your research to find the best offer. By using the OMO, you will be able to discover who offers the best rate for your circumstances and desired annuity type.

Should I really shop around?

Yes. You’ll find that there can be up to thirty per cent difference in the rates between the worst annuity provider and the best one. Equally, if you simply default to using your existing provider rather than looking at what’s available on the market, you could find that your income is adversely affected not just in the current year, but in your future retirement years. This can be avoided entirely by looking at what’s available on the market and taking the time to shop around.

Additionally, by carrying out this research you will discover where you can qualify for specialist or enhanced annuity products due to your lifestyle or health issues. Remember, these can further increase your income and are worth investigating if you are eligible. Factors such as smoking, your weight and even your postcode can have an influence on the annuity payment you will receive.

Surely everyone makes use of the Open Market Option?

They don’t, but informed customers will to make sure they get the best price for their retirement savings. Around one-third of individuals who purchase an annuity currently make use of the Open Market Option. This means that the vast majority two-thirds of people approaching retirement haven’t compared providers or found out whether they could qualify for a specialised or enhanced annuity which would pay them more money.

Why is this so important?

Various reasons are worth considering:

  1. When you use the Open Market Option, you get the information you need to consider a broad range of retirement income products and options for your needs. Remember, a Lifetime Annuity may be a standard or default option, but it may not actually be the best product for you. An Investment-Linked Annuity, Fixed-Term Annuity or Income Drawdown may suit your particular needs more closely.
  2. If you decide to purchase a Lifetime Annuity, you can only guarantee that you get the best available rate by making use of the Open Market Option and doing your research.
  3. If you are keen to maximise your retirement income then you should take the time to investigate whether or not you could receive an Enhanced Annuity. This is best done by investigating the Open Market Option.

Does this process cost me anything?

No, there is no charge for using the OMO and your existing pension provider cannot apply any cost for it. Equally, the majority of Independent Financial Advisors (IFAs) will not charge you for checking if you will qualify for Enhanced Annuity products, or for checking to find the best available annuity rate.

In conclusion, it makes sense to use the Open Market Option and maximise your chances of getting the best income from your pension. It really is the only guaranteed way of getting the best retirement option for your needs and the best available rate for the annuity product you choose.

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