What is a pension annuity? According to law, you can withdraw twenty-five percent of your pension funds as a tax free lump sum. However, the rest of the capital must be locked into an annuity scheme. Annuities are financial products that give out regular payments to you against the capital in your pension fund.

An annuity is therefore essentially like any other investment where you get an interest on your capital. Annuity rates are also variable depending on the plan and the provider. While rates may vary, the general trend is that annuity rates are falling.

Today, life expectancy is much higher than before. This means that people require payments for longer. There is a global financial crisis, and investments are giving bad returns. In this climate, pension annuity rates have taken a blow and are seen to be decreasing.

The best bet in this environment is to shop around for the highest annuity rates you can find and the open market option gives us the right to do just that. There are comparison websites that can help us compare various quotes and choose the correct option.

Most people end up taking the annuity that their pension provider offers, without shopping around first. This can result in huge losses in the amount of money you can get. In an already bleak scenario, this can prove to be a grave mistake.