Understanding of annuities improves by 25% in the last year, but common misconceptions still remain

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• 49% of over 50s recognise that annuities provide income certainty – up from 39% a year ago
• Income certainty in retirement remains a key consideration for 98% of people
• However, 48% of over 50s still aren’t familiar with lifetime annuities and how they work

Ten years on from the pension freedoms that sparked a shift away from annuities, interest and understanding of the role they can play is once again improving. New research from Standard Life, part of Phoenix Group, set out to understand the levels of understanding with over 50s and highlighted a number of stark trends.¹

When asked which retirement income products provide a guaranteed income for life, half (49%) of over 50’s correctly identified lifetime annuities – increasing from 39% of over 50’s in 2023². This represents a significant 25% improvement over the last year and echoes the latest ABI data which revealed annuity sales increased by 34% in the last year³ reaching a post-pension freedoms high.

When considering what to do with their pension pots, almost everyone said (95%) that income certainty and security are important to them.

Top annuity misconceptions dispelled:

1. An annuity allows you to pass your savings onto to loved ones - Just 30% of over 50’s (37% in 2023) identify that annuities can be set up to cover the life of a surviving partner. Annuities come with various benefit features designed to help ensure your loved ones are covered should anything happen. Value protection provides a death benefit to a customer, ensuring their investment is returned to their beneficiary (less any income taken), while purchasing a guaranteed period for up to 30 years secures a regular income for a customer’s beneficiaries or dependents in the event of death.
2. Annuities don’t have to be used on their own – Annuities can help shape the retirement you want, providing a regular, guaranteed income, but they can also be used alongside other retirement income products. The best approach can often be to combine different income solutions, providing both certainty and flexibility. Only 30% of over 50’s know that this is the case.
3. An annuity doesn’t have to be bought at the point of retirement – Only 31% of people know that an annuity can be bought at any point in their retirement, with various amounts of money. The reality is that you can purchase an annuity later in retirement, which also means you benefit from annuity rates improving with age.
4. Annuities can provide protection against the impact of inflation - It is possible for annuities to protect against the impact of inflation if this option is purchased at point of sale. An individual can choose whether to increase their income by a fixed percentage or in line with the Retail Price Index on an annual basis. Purchasing annuities in stages can also help mitigate the impact of inflation as rates increase the older you are.
5. Having underlying medical or health conditions doesn’t mean you get worse rates - While it is often assumed that having a health condition makes insurance products more expensive, enhanced annuities can often provide a more generous income to those suffering from health conditions or shorter life expectancy. Only 18% are aware that they will get a better annuity rate if they are suffering from a health condition.

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. This increasing awareness is clear to see in the recent ABI annuity sales data, reflecting rising demand among retirees and a shift in how financial advisers are considering these types of products alongside other retirement income solutions.

“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. Lifetime annuities, for example, offer the security of an income for life, while fixed term annuities provide certainty for a set period, allowing retirees to reassess their options later. Purchasing annuities in stages can also help mitigate the impact of inflation and market fluctuations. It’s important to understand the different annuity products available and the ways they can be used, which will ultimately help ensure people opt for the solutions that best meet their specific retirement needs. This is where advisers play a crucial role, as well as sources such as Money Helper which provide valuable information for those looking to stay informed.”

 

Notes to editors

1 - The research was commissioned by Standard Life and conducted by Opinium with a nationally representative sample of 2000 over 50 years old, between 25th July - 12th August 2024

2 - The research was commissioned by Standard Life and conducted by Opinium with a nationally representative sample of 2000 over 50 years old, between 6th- 14th March 2023.

3 - Latest pension annuity figures available through the Association of British Insurers.

Media enquiries

For further information, photos, video content or interviews, contact:

Jennifer Smallwood
Senior PR Manager
Standard Life, part of Phoenix Group
07858 367818
Jennifer_Smallwood@standardlife.com

Samantha Griffith
PR Manager
Standard Life, part of Phoenix Group
07752 465345
samantha_griffith@standardlife.com

 

About Standard Life

• Standard Life is a brand that has been trusted to look after peoples’ life savings for 200 years 
• Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers’ pension schemes.
• Standard Life is part of Phoenix Group, one of the UK's largest long-term savings and retirement businesses. We’re proud to be building on 200 years of Standard Life heritage together.
• Our products include a variety of Pensions, Bonds and Retirement options to suit people’s needs, helping our customers to invest and save for their future. We’re proud to offer a leading range of sustainable and responsible investment options.
• We support our customers on their journey to and through retirement with comprehensive, easy-to-understand guidance so they can invest in the right way for their needs and plan a future they feel confident about.
• Standard Life is the proud headline sponsor of Race for Life, Cancer Research UK’s flagship fundraising event series.