Understanding of annuities has jumped by 25% in the last year, but misconceptions still surround the product, new research from Standard Life has found.
When asked which retirement income products provide a guaranteed income for life, 49% of over-50s correctly identified lifetime annuities, up from 39% in 2023.
This improvement in understanding echoes the latest ABI data which revealed annuity sales increased by 34% in the last year, reaching a post-pension freedoms high.
When asked what they would like to do with their pension pots, the vast majority (95%) said income certainty and security are important to them.
Despite this, Standard Life’s research highlighted a number of knowledge gaps and misconceptions around annuities. Almost half (48%) of over-50s said they are unfamiliar with what lifetime annuities are and how they compare to other annuity products, while 53% were unsure when asked a series of true/false statements about annuities and how they work.
Only one in three (30%) of respondents correctly said that an annuity can be set up to cover the life of a surviving partner, with the same amount aware that an annuity can be purchased whilst remaining in drawdown.
Meanwhile, only 31% of people surveyed know that an annuity can be bought at any point in their retirement, with various amounts of money.
Pete Cowell, head of annuities at Standard Life, said: “It’s really encouraging to see a significant increase in awareness around the role a guaranteed income can play in retirement. Most people say they want some form of certainty with their retirement income, and annuities do just that.
“That said, common misconceptions still exist around what annuities are and aren’t. The reality is that there are many ways annuities can be used as part of the retirement income toolkit. Purchasing annuities in stages can also help mitigate the impact of inflation and market fluctuations.”
Main image: -jeremy-thomas-E0AHdsENmDg-unsplash
