Annuity confusion sees retirees miss out

Category: Annuities
Date: 2/16/2010

People approaching retirement are missing out on millions of pounds in valuable retirement income as a consequence of their lack of knowledge surrounding annuities.

Significant confusion exists amongst the over 55s over the different types of annuity available and the factors that can affect the level of annuity payouts, research from Aviva has found.

Despite widespread availability of joint annuities, only 29% of married people under 65 decide to take the joint annuity path and 41% of married people over the age of 65.

Upon the death of one of the two lives covered by a joint life annuity, an income continues to be paid to the surviving spouse, partner or financial dependant.

Over half of consumers over 55 did not even know what a joint annuity was.

Meanwhile, estimates suggest that 40% of people could benefit from taking out an impaired or enhanced annuity.

These are products available to people who have illnesses or health conditions - such as obesity - that are likely to have an impact on the length of their lives. Consequently they provide a higher than average monthly income.

However, almost two thirds of people did not realise that being overweight or a smoker could increase their annuity payouts, and opted for a standard annuity instead.

"This lack of knowledge could see some people settling for a far lower income than they are entitled to, with others finding that their income dries up all together when their partner dies," said Darren Dicks, head of annuity propositions at Aviva Life.

"The type of annuity a person chooses can impact on their standard of living for more than 30 years so it is vital that they understand as much as they can about these products before making a choice. A little knowledge could really make a difference and increase a person's retirement income by up to 10 per cent."

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