76% of retirees unaware of enhanced annuities

L&G says not disclosing health issues or lifestyle choices when buying an annuity is costing retirees thousands of pounds in pension income.

The survey found that consumers often see the impact of disclosing medical conditions for annuities as similar to other types of insurance products. Almost one in ten (8%) think ill health would reduce the amount of money they receive in retirement, while another 18% believe it won’t make any difference to how much money they get in retirement.

5% believed telling an annuity provider about a medical condition they have would see their application rejected.

L&G research also revealed that a larger number of people approaching retirement are not aware of what an annuity actually is. Just under half (47%) of the over-55s surveyed couldn’t accurately describe the product.

Overall, less than half of the people surveyed (49%) said they had heard of annuities and confusion about the product could be potentially affecting uptake, with just 26% of respondents who are retired saying they have an annuity.

Emma Byron, managing director at Legal & General Retail Retirement Income, commented: “Customers are confused about how annuities work. People with health conditions, as well as smokers and drinkers, stand to benefit from better annuity rates – but only if they disclose everything to their financial adviser or annuity company. First and foremost, we need to help customers to understand the potential benefits of annuities, which offer them a guaranteed income for life in retirement.

“Part of that is about education and information – but it’s also important that our industry talks plainly to consumers, removing the jargon and explaining the options available in a clear and helpful way. Just 26% of retirees have taken out an annuity, but there are thousands more who could benefit from a guaranteed income in retirement.”