There is concern that millions of people could be missing out on much-needed retirement income as they are unaware of the benefits of taking an annuity.
Almost half (48%) of UK adults say they do not know what an annuity is, according to research conducted by Standard Life.
Figures reveal that just 45% of women know what an annuity is, compared with 60% of men.
Of additional concern are the 58% of 35 to 44 year olds that are apparently unaware of annuity products.
By investing their pension pot in an annuity, pensioners guarantee themselves an annual income, while those with certain medical conditions can plump for an enhanced annuity, which enables them to draw a higher retirement income.
People with lifestyle conditions such as smoking also qualify for enhanced annuities.
A quarter of people that said they are aware of annuities believe the plans offer poor value for money.
Indeed, rules have recently been changed to allow people more choice over how they access their pension funds, effectively ending the requirement to put retirement savings into an annuity.
But a report by the Pensions Policy Institute (PPI) found that it is still the best option for the vast majority of people.
"As life expectancy increases and the prospect of living longer in retirement becomes a reality for many, having a solid understanding of your financial options during these years is important," John Lawson, head of pensions policy at Standard Life, said.
"Being better informed on how your pension can fund your retirement will put the customer in a stronger financial position in the long run. And taking an annuity is one of the most common ways to turn your savings into an income when you retire.
"Annuities offer you security and a reliable income throughout retirement years."
Our new Retirement Planning service is the ideal starting point for anyone thinking about their life after work.
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