Individuals approaching retirement should shop around and take full advantage of their rights to seek out the best annuity deals on offer, says the Association of Chartered Certified Accountants (ACCA).
Under the Open Market Option (OMO) imposed by the Financial Services Authority (FSA), financial services firms will be required, from 1 September 2002, to notify policy-holders approaching retirement that they have the right to shop around for the best deals. This reminder must be given to individuals four months before their intended retirement dates.
John Davies, Head of Business Law at ACCA, said: “The new rule has been introduced for the benefit of those individuals who are under the wrong impression that they have no alternative but to buy their annuities from the same firms with which they have been saving for their pensions. Although the majority of individuals fail to seek independent advice and shop around, research has shown that those who do so can achieve increases of up to 35% in their pension income.”
He added: “This is a difficult time for all those approaching retirement. The collapse in share prices has hit money purchase pensions especially hard. In addition to this, annuity rates have been low for some time and have recently seen further sharp falls. It is essential, therefore, that all options are explored and the best possible retirement deal is identified. Given the gains which can be achieved by shopping around, individuals are strongly urged to consider seeking advice from independent financial advisers”.