You must shop around

Not shopping around is the same as saying "I’m comfortable with the possibility of a 30% pay cut through retirement", which is clearly crazy.

Only 30% of those reaching retirement bother to shop around (exercising their right to what is called the Open Market Option or OMO), even though the incentive to shop around is considerable.

Female, £100,000 fund, 5 year guarantee

	Age attained
Company	50		55
	Level	R.P.I	Level	R.P.I
AEGON SE	£5,644.08		£5,959.08
Canada Life	£5,528.16	£2,917.68	£5,844.60	£3,284.28
Norwich Union	£5,518.92	£2,525.40	£5,834.88	£2,896.56
Legal & General	£5,484.00	£2,807.04	£5,797.32	£3,182.40
Prudential	£5,357.52	£2,870.28	£5,691.60	£3,243.24
Standard Life	£5,240.00	£2,530.00	£5,540.00	£2,900.00
AXA	£4,952.00	£2,482.00	£5,540.00	£2,812.00
Scottish Widows	£4,820.00	£2,410.00	£5,180.00	£2,790.00
Best/worst difference	15%	17%	13%	15%

The above table shows the variety of conventional annuity rates for a 50/55 year old female in 2007, both a level annuity and an increasing one. There are a couple of interesting points. First is the difference between the best and worst as highlighted in the last line - bearing in mind the long time over which the annuity will be paid (30 years plus) the differentials are considerable.

Secondly, with annuities for smokers (no greater medical problem than that) the differential will be even higher.

Last but not least, the equivalent table for men of these ages illustrates that the difference between best and worst rates is somewhat worse for women than men.

It should be stressed that the Open Market Option gives you access to a much wider range of types of annuity, in particular enhanced or impaired annuities. An enhanced annuity may simply arise because you are a smoker. An impaired annuity will be applicable if you have a serious illness which could impair your life expectancy. If either of these apply it could increase your retirement income by up to 30%.

Remarkably, it has been calculated that there may be as many as 30-40% of those who retire are entitled to either an enhanced or impaired annuity rate. And yet it appears that only 10% of those who retire opt for such annuities. Clearly this is crazy, and one of the purposes of this guide is to help make those moving towards retirement dates more aware of these positive choices.

Remember, not shopping around is the same as saying "I’m comfortable with the possibility of a 30% pay cut through retirement".

While I am writing I have to say how useful your guide is to those of us who know what we want but d...
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