Retirement warning: Over-50s missing out on up to £7,836 a year boost because they don’t know about it

The latest data from HL’s annuity comparison service shows that a 65-year-old with a £100,000 pension could get up to £7,836 a year with a single life level annuity offering a five-year guarantee.

Yet while annuity sales have climbed 34 per cent to £7billion in 2024, most people over 50 still do not understand how they work or how they could help them achieve the lifestyle they want in retirement.

A new YouGov survey for the UK’s first National Annuity Day highlights a widespread lack of understanding about guaranteed income options.

The campaign, created by Pension Potential, part of Punter Southall, and supported by Aviva, L&G and Standard Life, aims to educate older savers and support advisers in reaching those who could benefit most.

Around 35 per cent of over 50s want a “steady and stable” income but do not recognise annuities as a way to achieve it. Over half of women, at 52 per cent, said they prioritised “comfort and freedom” in retirement compared with 46 per cent of men, yet few realised annuities could provide that same sense of security.

Only 13 per cent of women understood that annuities can include inflation protection, compared with 26 per cent of men, showing a clear knowledge gap that leaves many financially vulnerable.

Steve Butler, Managing Director of Pension Potential and founder of National Annuity Day, said: “The survey highlights a clear mismatch between what people want in retirement and what they understand about how to achieve it.

“Many over 50s are seeking comfort, stability and predictability, exactly what annuities are designed to provide, but their understanding of these products is low.

“This lack of knowledge, particularly amongst women, risks people missing out on the financial security they want. National Annuity Day aims to close these knowledge gaps and help people make informed, confident decisions about their future.”

Regional differences were also found. Just 47 per cent of Londoners said they would prioritise joint life cover for a surviving partner compared with 62 per cent in the West Midlands.

Meanwhile, 15 per cent of women said they would rely solely on the state pension because they had no private savings, compared with 9 per cent of men. Experts say this highlights the ongoing gender pension gap and the need for more tailored advice.

Annuities can be particularly valuable for those who want predictable income, protection from market volatility and reassurance that their savings will last a lifetime.

They can also have inheritance advantages. From 2027, new inheritance tax rules will make most defined contribution pensions taxable, but certain annuities could remain exempt, offering a way for families to preserve more of their wealth.

Financial experts are urging people approaching retirement to review their options carefully and seek advice before making decisions about how to access their pension.

Understanding how annuities work, and the security they can provide, could make the difference between just getting by and enjoying the retirement they have worked for.