We need to talk about annuities

There's been a lot of discussion and debate about annuities recently.

With significant improvements to the rates on offer, they’ve become a much more attractive proposition for those who are approaching retirement. At the same time, the ongoing cost of living crisis and market volatility has increased demand for solutions that can offer greater financial certainty.

These two forces have ultimately combined and triggered a new era for retirement income planning. Despite this, our latest research shows that, even within the advised population, there’s still a lot of work to be done to help educate those who are approaching retirement about annuities, while also dispelling some of their long-standing myths.

What advised consumers are thinking

We spoke to 2,000 adults who are over 50-years old about their views on annuities and retirement. This included more than 200 consumers who currently pay for professional financial advice.1

What’s immediately striking is that, while almost all advised consumers (99%) say that income security in retirement is at least somewhat important to them, less than half (41%) believe that annuities are the best option for guaranteeing an income for life.

It also appears that the recent media coverage around improved annuity rates hasn’t fully filtered through. Indeed, almost half the advised population (48%) still associate annuities with being expensive and offering poor value for money. This is in spite of the fact that annuity rates have improved by 20% since June last year (and have jumped a massive 48% since the beginning of 2022).2

In monetary terms, the improvements over the last 12 months mean that a healthy
65-year-old male with a pension pot of £100,000 could now expect to pocket over £25,000 more over the course of their lifetime.

A new age. A new advice conversation?

While advised consumers are notably more knowledgeable about pension matters when compared to those who go without professional financial help, there are still sizeable numbers who are unsure about how annuities work and the benefits they can offer.

For instance, more than 3 in 10 (34%) advised consumers believe that annuities must be purchased at the point of retirement, while around the same number (30%) aren’t sure whether they’d need to use all of their pension savings to buy one. Interestingly, 4 in 10 (40%) don’t know they can buy an annuity to work in combination with income drawdown.

By raising awareness and understanding around annuities, it could lead to a deeper advice conversation. A good start would be amplifying the fact that managing your retirement income doesn’t have to be a ‘one and done’ decision.

In fact, many consumers may actually enjoy a better outcome if they were to combine the flexibility of drawdown with the security of an annuity, and then regularly review the balance between the two. This could see them gradually turn more of their unsecured pension savings into a guaranteed lifetime income as they grow older or their needs change.

If you’d like to show your clients the value of having an annuity as part of their retirement income mix, our annuity tracker actively monitors the average rates on offer across the market. It can also show you what the latest developments mean for expected lifetime incomes. You can find out more on our website.


1.Research was commissioned by Standard Life and conducted by Opinium, with a nationally representative sample of 2,000 adults aged 50+ between 6 – 14 March 2023

2.Annuity rates data provided by AMS Retirement. Accurate as of June 2023.