OMO? It could be OMG

Tuesday, 25th January 2011 18:04 - by Resident IFA

I seem to have taken a Blogging sabbatical since early December. I must admit, there was no great why or wherefore behind this; just needed the break. Anyhow, back to Personal Finance matters! That awful ‘OMG’ phrase could be relevant to you if you are not aware...or, worse still, do not exercise...your OMO. OMO stands for ‘Open Market Option’. When you come to retire, this allows you to use your Pension fund to scour the entire marketplace for the best income (annuity) rate available - not relying only on the company currently custodian to your Pension monies for an income option. An OMO does not come into the equation for an employee with a ‘Final Salary’ (Defined Benefit) Occupational Pension...but they are becoming as rare as one of Willy Wonka’s Golden Tickets! Statistics can be used to portray a situation in whatever light the user wishes. So, I won’t quote a figure, yet know that far too many people simply tick the box and take the income offered to them by their Pension provider at retirement. By utilising your OMO, you could reasonably expect an increase in income of 5-10%, although this could be a lot higher depending on an individual’s circumstances i.e. in less-than-perfect health. The topic for this Blog came to mind as I have read numerous articles recently quoting UK retirement numbers in 2011 and 2012. Here are my favourite 3:  500,000 annuities will be arranged in 2011  650,000 people will celebrate their 65th birthday in 2011  800,000 people will celebrate their 65th birthday in 2012 That is a lot of people who potentially can benefit from taking advantage of their OMO. Open Market Option = Choice = Potentially higher income for the rest of your life. Until next time...