Almost half, 48%, of over-50s are unfamiliar with what lifetime annuities are and how they compare to other annuity products.

Less than a third, 30%, correctly identified that an annuity can be extended to cover the life of a surviving partner.

Similarly, less than a third, 30%, are aware that an annuity can be purchased while remaining in drawdown.

The lack of knowledge has been highlighted in new research from Standard Life, part of Phoenix Group.

The research set out to understand the levels of understanding of annuities among the over-50s, a decade on from the Pensions Freedoms that sparked a shift away from annuities. 

Latest ABI data revealed annuity sales have soared by more than third, 34%, in the last year reaching a post-Pension Freedoms high, helped by much higher annuity rates.

Over the same time period understanding of annuities climbed by a quarter, 25%, according to the new study.

When asked which retirement income products provide a guaranteed income for life, almost half, 49%, of over-50s correctly identified lifetime annuities – up from 39% of over 50s in 2023.

But when asked a series of true/false statements about annuities and how they work, more than half, 53%, responded with “don’t know.”

Pete Cowell, head of annuities at Standard Life, said: “Common misconceptions still exist around what annuities are and aren’t. The reality is that there are many ways annuities can be used as part of the retirement income toolkit.”

Lifetime annuities, for example, offer the security of an income for life, he said, while fixed term annuities provide certainty for a set period, allowing retirees to reassess their options later. Purchasing annuities in stages can also help mitigate the impact of inflation and market fluctuations, he added.

Mr Cowell said: “It’s important to understand the different annuity products available and the ways they can be used, which will ultimately help ensure people opt for the solutions that best meet their specific retirement needs. This is where advisers play a crucial role.”

• Research was commissioned by Standard Life and conducted by Opinium with a nationally representative sample of 2000 over 50 years old, between 25 July - 12 August 2024 and between 6 - 14 March 2023.