Annuities 'offer increased protection'
06 December 2011
Purchasing an annuity could be a good option for older people wanting to ensure they have enough money for their retirement.
According to research released by Standard Life, 48 per cent of Britons do not know what an annuity is, with females less likely to have knowledge of the financial product than males.
The poll by the organisation found 60 per cent of men can describe an annuity, compared with just 45 per cent of males.
It was also discovered 58 per cent of those aged between 35 to 44 could not explain what an annuity is, while around a quarter of respondents said they believe annuities are not good value.
John Lawson, head of pensions policy at Standard Life, stated it is becoming increasingly important to have a solid knowledge of retirement options, due to the fact pensions are being cut and people are living longer on average than ever before.
"Being better informed on how your pension can fund your retirement will put the customer in a stronger financial position in the long run," he said.
Mr Lawson noted turning savings into an annuity is one of the most common ways to provide income in retirement, explaining it is "vitally" important awareness of the product is increased.
He added: "Annuities offer you security and a reliable income throughout retirement years. As people live longer, with some possibly living in retirement for 25 to 30 years, having that guaranteed income stream has obvious advantages."
Mr Lawson also highlighted the fact there is a wide range of options out there for those who decide buying an annuity is the best choice for them, recommending individuals planning their retirement to take lots of advice before making a final decision about what to do with their money.
Skandia's head of retirement planning Adrian Walker recently predicted enhanced annuities are set to play a bigger part in people's plans for the future.
Speaking to IFA Online, he explained flexible drawdown is going to become an increasingly popular option in the next few years, but this is only useful for those with a pension income of over £20,000.
For those who are not interested in purchasing an annuity to secure their retirement income, using the equity release calculator from Key may be another good option.
Posted by Alison Stephenson