Almost half of over 50s lack awareness on the wide range of annuities available

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• Almost half (45%) don’t know that annuities come in many forms, with different benefits
• Just 26% are familiar with level annuities, 24% with inflation-linked annuities, and 10% with enhanced annuities
• Half (56%) are unaware that annuities can be set up to cover the life of a surviving partner
• Only a quarter (27%) are familiar with joint life annuities, one in ten (10%) value/capital protection, and 20% guarantee periods

Almost half (45%) of over 50’s admit they don’t know that annuities come in many forms and with various options, according to new research from Standard Life, part of Phoenix Group, which explores awareness and levels of knowledge amongst the over 50’s around annuities. This lack of awareness is despite the fact that annuities come in many different variations, and with many different options, which can be shaped to suit individual retirement needs and provide a level of flexibility which can be hugely important for many retirees.

When those who had already annuitised, or planned to do so, were asked about different annuity options, there was also limited familiarity with the options available¹:

• Just over a third (37%) are familiar with single life annuities (which is based on the lifetime of just one person and provide income for the remainder of their life)
• Only a quarter (26%) are familiar with level annuities (which pay the same yearly income from the start of retirement, regardless of inflation)
• Just a quarter (24%) are familiar with inflation-linked annuities (which increase each year in line with an inflation index)
• Only 10% of over 50s are aware of enhanced annuities (which provide a higher income if a person’s health or lifestyle may shorten their lifespan)
• Just 10% are aware of “value/capital protection” (which allows the annuitant to protect all or part of the amount used to buy their annuity, which gets paid as a lump sum when the annuitant passes away)

Furthermore, many over 50s are under the misapprehension that annuities will not allow them to pass on wealth to surviving relatives in the event of their death, and state this as a key barrier to purchasing one. One in ten (13%) are not planning to purchase an annuity because of this reason, with over half (56%) of all over 50s unaware that an annuity can be set up to cover the life of a surviving partner.

This is also reflected among those over 50’s who have already bought an annuity, or are considering doing so, with just a quarter (27%) familiar with joint life annuities (which provide a regular retirement income to their surviving spouse, civil partner or dependants if they die).

Furthermore, only one in five (20%) are 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, commented:
“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 your research to ensure you’re shaping your annuity purchase around your retirement needs. For example, if you want to ensure your surviving spouse, partner or dependents receive a regular retirement income, a joint life annuity will enable you to pass on your wealth in this way.

“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% in September 2023².

Pete continued,
“An annuity is designed to give you comfort and certainty when it comes to your retirement income, and with different options and benefits available, it’s possible to shape it around what you might need. Annuities can also be used alongside a ‘mix and match’ approach, allowing savers to guarantee a level of income security, while also providing the opportunity to flexibly access and potentially grow savings through drawdown.”

ENDS

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Notes to editors

*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.

¹ Different types of annuities and options:

1. A single life annuity is a type of annuity based on the lifetime of just one person and provides income for the remainder of their life
2. A level annuity is a type of annuity that pays the same amount of regular income from the start of a person’s retirement until the end of any guarantee period, or until they die
3. An Inflation linked annuity (also known as index-linked annuity or inflation-linked annuity) is a type of annuity that gives the option for retirement income to increase in line with an inflation index, or to increase at an agreed fixed rate each year
4. An enhanced annuity or an impaired annuity is a type of annuity that may pay a person a higher regular retirement income if their life expectancy is shortened because of their lifestyle (for example if you smoke) or your medical history. For this type of annuity the annuity provider will normally ask for a medical questionnaire to be completed and a report from your doctor
5. A joint life annuity is a type of annuity that pays a person a regular retirement income for the rest of their life. When they die, it provides a regular retirement income (at the same or a reduced amount) to their surviving husband, wife, civil partner or dependants

² Standard Life Annuity Rate Tracker – latest available here – revealed average annuity rates continued to rise in Q3 2023.
 

About Standard Life

• Standard Life is a brand that has been trusted to look after peoples’ life savings for nearly 200 years
• Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers’ pension scheme.
• Standard Life is part of Phoenix Group, the largest long-term savings and retirement business in the UK. We’re proud to be building on nearly 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.