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GLOSSARY

Open market option definition

Published by a LexisNexis Pensions expert

What does Open market option mean?

The right to choose an annuity from an insurance company offering the best deal in the market using the fund in a pension scheme. It may not necessarily be the insurer with the best or highest annuity; good administration and solvency is also important.

In 2011 the Treasury and DWP established an OMO Review Group and in 2012 the ABI issued a Code of Conduct on the OMO. A study of annuity practice commissioned by the NAPF and written by Dr Debbie Harrison (Treating DC Members Fairly at Retirement) was published in 2012.

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Retirement options of DC members before 6 April 2015 [Archived]

Retirement options of DC members before 6 April 2015 [Archived] ARCHIVED: This Checklist contains information on retirement options for DC members prior to 6 April 2015. It is not maintained and is for background information only. For more information on retirement options for DC members, see Practice Note: Retirement options—DC members. Pre-6 April 2015 pension payment options Until 5 April 2015, a DC member's pension pot could be used to provide one of the following pension payments: • `a scheme pension—a 'scheme pension' means either a pension paid directly by the scheme administrator from the scheme's own funds or a pension paid by an insurance company selected by the scheme administrator. DC occupational pension schemes and personal pension schemes do not usually offer the option of a scheme pension. However, should a DC scheme allow for a scheme pension, the member should first be given an opportunity to select a lifetime annuity instead • a lifetime annuity—pre-6 April 2015 lifetime annuities payable by an insurance company had to satisfy...

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Retirement communications in FCA-regulated pension schemes

FORTHCOMING DEVELOPMENT: Section 10 of the Finance Act 2022 will increase the normal minimum pension age (NMPA) from 55 to 57 on 6 April 2028 (save for members of the firefighters, police and armed forces public service pension schemes).The Finance Act 2022 will also give members of registered pension schemes a right to take their benefits before age 57, if on or before 4 November 2021 they either had an ‘unqualified right’ to take benefits or were in the process of a substantive transfer to a scheme offering an unqualified right to a protected pension age of less than 57 on or before 4 November 2021. To benefit from this new 2028 protection, the rules of the pension scheme must have included (on 11 February 2021) an unqualified right to take the entitlement to scheme benefits before age 57.For further information, see Practice Note: Increasing the normal minimum pension age (NMPA) to 57—pensions impact.Since the introduction of the pension flexibilities (also known as pension freedoms) on 6 April 2015, changes...

Annuities for pension lawyers

FORTHCOMING DEVELOPMENT 1: Section 10 of the Finance Act 2022 will increase the normal minimum pension age (NMPA) from 55 to 57 on 6 April 2028 (save for members of the firefighters, police and armed forces public service pension schemes).The Finance Act 2022 will also give members of registered pension schemes a right to take their benefits before age 57, if on or before 4 November 2021 they either had an ‘unqualified right’ to take benefits or were in the process of a substantive transfer to a scheme offering an unqualified right to a protected pension age of less than 57 on or before 4 November 2021. To benefit from this new 2028 protection, the rules of the pension scheme must have included (on 11 February 2021) an unqualified right to take the entitlement to scheme benefits before age 57.For further information, see Practice Note: Increasing the normal minimum pension age (NMPA) to 57—pensions impact.FORTHCOMING DEVELOPMENT 2: In the Autumn Budget 2024 of 30 October 2024, the Chancellor of the...

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Where an individual has a trust set up under a retirement annuity contract (section 226 policy/RAC) to hold the lump sum death benefit in trust, pay an annuity to spouse/dependant and all other benefits held in trust for the member, if that member now transfers the policy to an immediately vesting personal pension or exercises the open market option to take an annuity, are the benefits to be paid to the member directly or to the trust originally established under the RAC?

Where an individual has a trust set up under a retirement annuity contract (section 226 policy/RAC) to hold the lump sum death benefit in trust, pay an annuity to spouse/dependant and all other benefits held in trust for the member, if that member now transfers the policy to an immediately vesting personal pension or exercises the open market option to take an annuity, are the benefits to be paid to the member directly or to the trust originally established under the RAC? This Q&A assumes that the member’s rights under the RAC all consist of existing and not future property rights. Retirement Annuity Contracts (RAC) were first introduced by the Finance Act 1956 as defined contribution arrangements for individual members. They were subsequently governed by section 226 of the Income and Corporation Taxes Act 1970, and were sometimes known as 'section 226 Policies'. Following the introduction of personal pension schemes on 1 July 1988, it is no longer possible to establish new RACs, but RACs established prior to that date...

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