Not everyone knows what an annuity really is

Different people were asked to choose the correct version between a few descriptions of an annuity. Among the proposed options, only two were correct. However, one quarter of the interviewees provided a wrong description. Correct descriptions were provided by 33 percent and 29 percent.

The survey was carried out by Sun Life Financial of Canada across the UK, and showed that determining annuity caused confusion among different ages, almost one fourth among the older than 55-year-old group wrongly believed that annuity meant a pot of savings accumulated during their whole life and almost the same proportion of the respondents did not know how to define an annuity.

Only 1pc of the 55-year-old interviewees responded that for them an annuity would mean an insurance policy to protect against unemployment during their work life period.
It turns out that quite a high proportion of people are lacking a clear knowledge on how to plan their retirement income. This especially applies to those over 55 years old for which the purchase of an annuity package is about to happen.

Despite the common believe that everyone knows everything about life and pension annuity, for many people it is worth figuring out how an annuity really works as a source of income before assuming that all annuity offerings are the same.