Open Market Option
Written by
David
Reviewed by
Richard
Date
March 2025
Your freedom to choose an annuity provider
What the Open Market Option means
Why comparing options matters
Finding an annuity that matches your retirement plans
What if your pension provider offers a strong deal?
The origins and importance of the Open Market Option
Next steps
Your freedom to choose an annuity provider
When the time comes to turn your pension savings into income, you’re not limited to the annuity offered by your pension provider.
The Open Market Option (OMO) gives you the freedom to compare products from different annuity providers and select one that best aligns with your retirement needs.
This option could lead to a better rate—and therefore more income—than accepting your scheme’s default offer.
What the Open Market Option means
The Open Market Option is a right granted to holders of defined contribution pensions. It allows you to take the value of your pension pot and shop around for an annuity from any provider, not just the one managing your current pension.
When you near retirement, your provider will typically send you a quote outlining the income they can offer. But this is only one potential route. Other providers may offer different terms, including higher income or more flexible features. Taking advantage of the Open Market Option can lead to better financial outcomes.
Importantly, your current pension provider cannot require you to stay with them or prevent you from seeking alternatives.
Why comparing options matters
Annuity rates can differ considerably between providers and are influenced by factors such as interest rates and economic conditions. What one provider offers might be substantially different from what another is willing to pay for the same pension pot.
By comparing options, you may significantly improve your long-term income. Even a modest difference in rate can add up over a lifetime of payments.
Enhanced annuities
Another benefit of exploring the wider market is the possibility of qualifying for an enhanced annuity. These products offer increased income to people with certain health conditions or lifestyle factors that may impact life expectancy.
Many people overlook this option, assuming they won’t qualify. But the criteria are broader than often expected—covering conditions such as high cholesterol, diabetes, or a history of smoking.
Not all providers assess health and lifestyle in the same way, so comparing across the market can reveal better terms that might not be offered through your existing scheme.
Finding an annuity that matches your retirement plans
There are several types of annuities, and choosing the right one can depend on your financial goals and personal situation:
-
Lifetime annuities offer regular income for the rest of your life.
-
Fixed-term annuities provide payments for a limited period, with potential flexibility later on.
-
Escalating annuities increase over time to help keep pace with inflation.
-
Death benefit options allow you to support a spouse or financial dependent after your death.
Understanding these options allows you to tailor your annuity to your needs and preferences.
What if your pension provider offers a strong deal?
It’s possible that your existing pension scheme offers a competitive annuity—especially if it includes a Guaranteed Annuity Rate (GAR). GARs were often set in times of higher interest rates and can be more generous than today’s standard market rates.
Still, even if your scheme’s offer seems favourable, it’s worth comparing it with other providers. This ensures that you’ve explored all options and are confident in your decision.
The origins and importance of the Open Market Option
The OMO exists to help pension savers get the best value from their retirement savings. Industry bodies such as the Association of British Insurers (ABI) and the Pensions Institute have highlighted the importance of using the option, citing substantial losses for retirees who fail to shop around.
As of the early 2010s, studies suggested that UK retirees were missing out on up to £1 billion in lifetime income annually by not comparing providers. The OMO was introduced to address this gap and improve financial outcomes in retirement.
Taking control of your retirement income
Selecting an annuity is a major financial decision, often with lifelong implications.
Making use of the Open Market Option empowers you to explore better rates, check for enhanced terms, and choose a structure that aligns with your priorities.
By approaching this decision thoughtfully and comparing your options, you can make more informed choices that support your financial wellbeing throughout retirement.
Next steps
Want to see how much income you could really get?
Check the latest annuity rates or get a personalised quote now through Legal & General, Aviva, or use Retirement Line’s annuity calculator to get an up-to-date forecast — it only takes a minute to get started.
Pension Annuity
Annuity Guides
© Which Annuity 2025.
Please remember that the content on this site is purely informational and should not be considered personal financial advice. We are not affiliated with any of the websites mentioned or linked to on our website.