Annuities are confusing customers with more than 40 per cent admitting they have no idea what they are, says Sun Life Financial of Canada.
New research, carried out this month, revealed that four in ten consumers have no idea what an annuity is and a quarter of people selected incorrect answers when presented with a choice of questions describing what an annuity is.
The survey of over 1,000 UK adults highlighted confusion about annuities by those falling into the retirement age group. Nearly a quarter of over 55 year olds wrongly think an annuity is a ‘savings pot which you accumulate throughout your working life' and a further 23 per cent said they had no idea.
Sun Life Financial of Canada also asked people how they would prefer to receive income in their retirement. Most of the over 55 year olds asked said they wanted their money in retirement to remain invested and to be able to draw down an income on their pension, whilst seven per cent want to ensure they have the same guaranteed retirement income every month, as provided by a conventional annuity.
Mark Stopard, Head of Marketing at Sun Life Financial of Canada said: “There is a clear knowledge gap when it comes to retirement income planning, particularly amongst the over 55s, for whom purchasing an annuity product is imminent.
“Although people have firm views as to how they want to receive their income in retirement, there is a basic lack of understanding when it comes to annuities, and how they operate as an income generator.
“ It's likely people will assume all annuity products are the same, which may help to explain why so many end up with level annuities that offer no protection against inflation and the changing income needs of retirement.”
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