Open Market Option Annuity: The Best Way to Add 10-20%

Open market option annuity rules exist for one reason: to stop you buying your annuity from whoever happens to run your pension, just because it’s the path of least resistance. Most people don’t realise they’re allowed to shop around at all — and that single gap in awareness is quietly costing UK retirees a meaningful slice of their income every single year for the rest of their lives.

Here’s what the open market option actually is, why it can add 10-20% to your annuity income for an identical pot, and exactly how to use it before you buy.

Written and checked by Tayyab Yaqoob, Site Editor at MortgageToolsHub — figures checked against FCA retirement income market data. Last updated September 2026.

On This Page

• What the open market option actually is
• Why so few people use it
• How much it really adds — the FCA numbers
• A worked example, same pot, two providers
• Why rates vary so much between providers
• How to actually use the open market option
• What you lose by skipping it
• Combining it with an enhanced annuity
• Common mistakes when shopping around
• FAQ

Image 1 — hero graphic (alt text: “open market option annuity — shopping around adds 10-20%”)

What The Open Market Option Actually Is

The open market option, often shortened to OMO, is your legal right to buy your annuity from any provider on the market — not just the company that’s been holding your pension pot. Your existing pension provider will usually send you a quote as your policy approaches retirement, and it’s easy to assume that’s simply “your” annuity rate. It isn’t. It’s one quote, from one provider, and it is very often not the best one available for your exact age, pot size, and health profile.

Every UK annuity provider prices risk slightly differently, based on their own assumptions about life expectancy, investment returns, and how much business they want to write that quarter. That means the same £100,000 pot, from the same 65-year-old, can produce genuinely different annual incomes depending on which insurer you ask — sometimes a small gap, sometimes a substantial one.

Why So Few People Use It

Despite the open market option being available to virtually everyone with a defined contribution pension, take-up has historically been low. Part of the reason is simple inertia — accepting the quote that arrives in the post feels like the default, low-effort choice, especially at a stage of life when people are dealing with a lot of paperwork and decisions all at once. Part of it is a lack of awareness that switching provider is even possible, since the letter from your existing provider doesn’t always make that option obvious or attractive to pursue.

Regulatory pressure has pushed providers to present the open market option more clearly in recent years, following FCA scrutiny of the retirement income market, but the underlying behaviour — accepting the first quote — persists for a large share of buyers.

Image 2 — diagram (alt text: “how the open market option annuity process works”)

How Much It Really Adds — The Numbers

Market studies and regulator reviews of the annuity market have repeatedly found that shopping around through the open market option can increase the income received for an identical pot by somewhere in the region of 10-20%, and sometimes more for people who also qualify for an enhanced rate once health and lifestyle factors are properly declared to a wider panel of providers. That range isn’t a guarantee for every individual case, but it reflects a consistent, well-documented pattern across the market rather than an isolated example.

To put that in concrete terms: on a £100,000 pot producing roughly £7,700 a year from one provider, a 15% uplift from shopping around would mean closer to £8,850 a year — an extra £1,150 every year, for the rest of your life, for doing nothing more than requesting a few extra quotes before signing anything.

A Worked Example, Same Pot, Two Providers

Say you’re 67, with a £120,000 pension pot, and your existing provider’s default quote comes in at £8,400 a year for a single life, level annuity with no guarantee.

• Provider A (your existing pension provider): £8,400 a year
• Provider B, found via the open market option: £9,300 a year for the identical structure — roughly 11% higher
• Provider C, also found via the open market option, after declaring a health condition: £10,050 a year — roughly 20% higher than the original quote, once an enhanced rate is applied

Across a 20-year retirement, the gap between simply accepting Provider A’s letter and properly shopping around through the open market option adds up to tens of thousands of pounds — money that’s gone for good the moment an annuity is purchased, since the decision generally can’t be reversed.

This matters more the larger the pot involved, simply because the percentage gap translates into a bigger cash amount every year. On a £50,000 pot, a 15% uplift might mean an extra £450-£500 annually. On a £250,000 pot, that same percentage gap is closer to £2,300-£2,500 a year — which is exactly why larger pots deserve, if anything, even more effort spent comparing the market rather than less.

Image 3 — comparison chart (alt text: “open market option annuity — same pot, three provider quotes compared”)

Why Rates Vary So Much Between Providers

Annuity pricing isn’t a single industry-wide number — each insurer sets its own rates based on its own assumptions about how long its customers will live, how its own investments (largely gilts) are performing, and how competitively it wants to price business at that moment. Our guide to why annuity rates follow gilt yields explains the investment side of that pricing in more depth.

Providers also specialise differently — some are more competitive on standard rates, others are stronger on enhanced or impaired-life annuities, which is exactly why comparing a single quote against the whole market, rather than assuming your provider’s number represents “the” rate, matters so much.

A Bit Of History: Why The Open Market Option Exists

The open market option isn’t a new idea, but its importance has grown considerably since the 2015 pension freedoms changed how people access retirement savings. Before then, a large share of savers simply took whatever annuity their existing pension provider offered, often without realising alternatives existed at all. Regulatory reviews of the retirement income market subsequently found that a meaningful proportion of annuity buyers were still not shopping around, even when doing so was clearly in their financial interest.

That evidence pushed the FCA to require clearer disclosure from providers about the open market option, including plainer wording in retirement packs and prompts to compare the market before committing. The rules have improved awareness, but the responsibility for actually gathering competing quotes still sits with the individual — no provider is required to source a better deal on your behalf, which is exactly why this remains a step people need to take deliberately rather than expect to happen automatically.

Broker vs DIY: Which Route To Use

You can use the open market option either by contacting providers directly yourself or by going through a regulated annuity broker who searches the market on your behalf. Doing it yourself gives you full control and no fees, but means requesting and comparing quotes from each provider individually, which takes time and organisation. A broker typically has access to a wider panel of providers, including some that aren’t easily reached directly, and can handle the health disclosure process across multiple insurers at once — often at no direct cost to you, since brokers are usually paid via commission built into the provider’s pricing rather than a separate fee.

Neither route is inherently better for everyone. Someone comfortable comparing paperwork and confident they know which providers to approach may do perfectly well going direct. Someone with more complex health conditions, or simply less time to manage several separate applications, often gets more value from a broker who can run the enhanced-rate comparison across the whole panel in one process.

How To Actually Use The Open Market Option

• Request your existing provider’s quote first — this becomes your baseline to beat, not your default choice
• Get quotes from at least three to five other providers or through a broker who can search the market for you
• Declare your full health and lifestyle information to every provider you approach, since this can unlock an enhanced rate worth pursuing in its own right
• Compare like-for-like structures — level vs escalating, single vs joint life, with and without a guarantee — using identical pot sizes across every quote
• Use free, impartial guidance from Pension Wise before committing, since an annuity purchase is one of the most difficult financial decisions to reverse

What You Lose By Skipping It

Skipping the open market option doesn’t just mean potentially leaving 10-20% of your income on the table — it also means you may miss out on structures your existing provider simply doesn’t offer competitively, such as strong enhanced rates for a health condition, or a joint life structure priced more favourably elsewhere. Because an annuity, once bought, generally locks in that income for the rest of your life with no opportunity to switch later, the cost of skipping this one step is uniquely permanent compared with most other financial decisions.

It’s worth thinking about this in terms of total retirement income rather than a one-off saving. A 15% gap on £8,000 a year is £1,200 annually, and over a 20-25 year retirement that’s £24,000-£30,000 in income that simply isn’t there because a single quote was accepted without comparison. Very few other financial decisions carry a cost of inaction anywhere close to that scale for so little extra effort.

Combining It With An Enhanced Annuity

The open market option and an enhanced annuity work particularly well together, since a wider panel of providers gives you more chances to find an insurer that prices your specific health conditions generously. Conditions like diabetes, high blood pressure, high cholesterol, or a history of smoking can all qualify for enhanced terms, and different providers weigh these conditions differently — which is exactly why relying on a single provider’s assessment, rather than shopping the enhanced rate around too, can understate what you’re actually entitled to. Our guide to enhanced annuities covers which conditions tend to move the number the most.

Image 4 — illustration (alt text: “open market option annuity combined with an enhanced rate”)

Common Mistakes When Shopping Around

• Only comparing headline income, not the structure — a slightly lower income with a guarantee period or inflation-linking might suit you better than the highest raw number
• Not disclosing health conditions to every provider — enhanced rates vary meaningfully between insurers, so a single disclosure isn’t enough
• Waiting too long between quotes — annuity rates move with gilt yields, so quotes gathered weeks apart aren’t always comparable
• Assuming your existing provider will automatically match a better external quote — some will negotiate, most won’t, and you shouldn’t assume it as a fallback
• Treating the default letter as the only option, rather than as one quote among many you’re entitled to compare

Frequently Asked Questions

What is the open market option for an annuity? It’s your legal right to buy an annuity from any provider on the market, rather than automatically accepting a quote from the company that currently holds your pension pot.

How much can the open market option really add to my annuity income? Market data and regulator reviews commonly point to a 10-20% uplift for an identical pot when shopping around properly, sometimes more once enhanced rates are factored in.

Do I have to use the open market option, or can I just accept my provider’s quote? You’re never obliged to use it — accepting your existing provider’s quote is entirely valid — but doing so without comparing it against the wider market means you can’t know whether it’s competitive.

Does the open market option cost anything to use? No — requesting quotes from other providers, whether directly or through a broker, doesn’t cost anything upfront, and using it doesn’t affect your pension pot’s value before you buy.

Can I use the open market option alongside an enhanced annuity application? Yes — in fact, they work best together, since shopping across multiple providers increases the chance of finding an insurer that prices your specific health conditions most generously.

Is there a deadline for using the open market option? There’s no fixed deadline, but since annuity rates move with market conditions, it’s best to gather all your comparison quotes within a similar, short window so they’re genuinely comparable.

Should I use a broker or contact annuity providers myself? Both are valid — going direct gives you full control with no fees, while a regulated broker typically reaches a wider panel of providers and can manage health disclosure across all of them at once, usually at no separate cost to you since they’re paid via commission.

Will my current pension provider match a better quote I find elsewhere? Some will, many won’t — it varies by provider and isn’t something to rely on. Treat any external quote as a genuine alternative to switch to, not just a bargaining chip with your existing provider.

Next Step

Don’t let a single letter decide your income for the rest of your life. Run your own numbers through our Annuity Rates Calculator, then use the open market option to get at least three real quotes before you commit — and if you haven’t already, see how much annuity £100,000 typically buys as your baseline for comparison.

Sources: figures reflect patterns reported in FCA reviews of the UK retirement income market and industry best-buy comparisons. Verify any provider or broker on the FCA register, and consider Pension Wise, the government’s free guidance service, before buying an annuity.