RPSM09101760 - Technical Pages: Member benefits: A secured pension: Lifetime annuity: Open market option

The open market option

The member must be given the opportunity to choose the insurance company a lifetime annuity is purchased from. This facility is generally referred to as an open market option.

If the member isn’t given that choice the resulting annuity contract won’t fit within the lifetime annuity definition. (The definition of a lifetime annuity specifically requires that the member must have the option of choosing the contract provider.) This is an explicit requirement of the legislation and helps to ensure flexibility for those providing for their retirement.

If the member fails to select an insurance company to provide the lifetime annuity then the scheme administrator or scheme trustees may select the insurance company. The requirement is that the member must have the opportunity to select the insurance company. If they fail to take that opportunity then the onus falls on to the scheme administrator or scheme trustees.

Even where a money purchase scheme provides the member with the option of a scheme pension, the member must still be given the opportunity of choosing to go down the lifetime annuity route (using the open-market option).