Awareness of the impact of lifestyle, health, inflation and postcode on annuity rates is low, with 45 per cent of over 50s unaware that different product structures exist, according to new research.
Figures from Standard Life show just 26 per cent of over 50s are familiar with level annuities, while just 24 are aware of inflation-linked annuities, and 10 per cent with enhanced annuities.
More than half, 56 per cent, are unaware that annuities can be set up to cover the life of a surviving partner, while 27 per cent are familiar with joint life annuities, 10 per cent value/capital protection, and 20 per cent guarantee periods.
The misapprehension that annuities do not allow retirees to pass on wealth to surviving relatives in the event of their death is a barrier to purchasing the product for 13 per cent of over 50s, while 56 per cent area unaware that an annuity can be set up to cover the life of a surviving partner.
Awareness is even low amongst those who have already bought an annuity, or are considering doing so, with just 27 per cent familiar with joint life annuities and 20 per cent familiar with the term “guarantee period”, which guarantees that an individual’s annuity continues to be paid out over a number of years, even if the individual passes away within this period of time.
Pete Cowell, head of annuities at Standard Life, says: “There is comfort in the income certainty provided by an annuity which is invaluable when planning for retirement. However, with so many options available, it’s vital to do research.
“Ultimately, the most suitable type of annuity is usually determined by a person’s financial goals and individual circumstances. This research suggests that many people of retirement age might overlook their options due to a lack of awareness and miss out on the peace of mind annuities can provide. Professional advice can play a crucial role here in helping people understand the true value of an annuity.
Annuity rates have strengthened significantly over the last two years and the latest Standard Life Annuity Rate Tracker found that rates for a healthy 65-year-old reached 7.25 per cent in September 2023 for an annuity with no inflation protection.
