If you are currently looking to find the best annuity choice for yourself the chances are you are aware of the 'Open Market Option' and your right use your pension fund to buy your annuity from any provider and not just the company you have built up your pension fund with. You may have recently received a letter from your pension company informing you of your 'Open Market Option' but the FSA (Financial Services Authority) has, in a recent report, indicated, that many people do not fully understand this and are missing out on getting a higher retirement income by not taking advantage of this.

By exercising your 'Open Market Option' you could increase your retirement income by up to 40% so it is worth taking the time and effort to ensure that you make the right decision as once you have bought your annuity you cannot reverse.

• Male 50

  £10,089

  Female 50

  £10,089

• Male 55

  £10,089

  Female 55

  £10,089

• Male 60

  £10,089

  Female 60

  £10,089

• Male 65

  £10,089

  Female 65

  £10,089

• Male 70

  £10,089

  Female 70

  £10,089

• Male 74

  £10,089

  Female 74

  £10,089

• 

  When to Buy Your Annuity

  When you are approaching the point of retirement, your pension provider will normally offer you a quote for an annuity from them. However, you have the legal right to shop around (called the "open market option"); make sure you do - as with all financial products you will often find considerable variance between what different providers will offer. Your pension provider will send you a letter with the value of your fund prior to your retirement date - you should use this figure to compare annuity quotes with.

• 

  Fixed or Escalating Rate?

  Level/Escalating annuities. You can choose an annuity to pay either a level income throughout the life of the annuity, or an escalating income which can either increase in a set increment (for example by 5% per year) or in line with inflation. You should note that level annuities will pay a significantly higher amount in the early years (although the real value of the income might erode with inflation), whereas escalating annuities pay more the older you get. Although you might not consider inflation much of a factor at the moment, this can make a considerable difference over the long term to your income.

• 

  Is My Partner Entitled to Benefits?

  Single or Joint? When you come to purchase an annuity you can normally set up the income to be paid for as long as you live (single); or, if you die before your partner, as long as they live (joint). It is worth noting that whilst a joint annuity will pay less than a single annuity (as with younger age, a provider will expect to be paying a joint annuity for longer) your spouse/partner would not lose the income from the annuity in the event that they outlive you. There is a third option also: to have a joint annuity where the income continues paying a reduced rate after the first death. This can strike a balance between making sure your loved ones still have an income (albeit reduced) when you go, but also giving a slightly higher annuity rate in comparison to a standard joint annuity.

• 

  At What Age Can I Buy My Annuity?

  You can purchase an annuity from the age of 55; however, there is no requirement for you to actually retire when you start to receive your pension. Generally speaking, the younger you purchase your annuity, the less of an income it will pay as the provider assumes that they will have to pay for a longer period.

• 

  When Can I Take My 25% Tax Free Sum?

  When you take your pension, you are able to take a portion of it (up to 25%) as a tax-free lump sum (this is also called a Pension Commencement Lump Sum for those of you who like a technical term!). Bear in mind that any cash you take from your pension will reduce the amount of income you will get when purchasing your annuity.