Understanding of annuities among over-50s has increased significantly over the past year, with two-thirds (67 per cent) now correctly identifying that annuities provide a guaranteed income for life, according to research from Standard Life.

The retirement specialist said this represented an 18 percentage point increase from 2024, when fewer than half (49 per cent) of over-50s understood the core purpose of an annuity.

The findings come as annuity rates continue to strengthen, reaching 7.6 per cent in March, while demand for guaranteed retirement income has grown amid ongoing economic uncertainty.

Standard Life's research also found that awareness of several key annuity features has improved over the past year.

The proportion of over-50s who recognised that some annuities can increase in line with inflation rose from 20 per cent to 25 per cent, while awareness that annuities carry no investment risk increased from 34 per cent to 40 per cent.

Knowledge of product flexibility also improved, with 37 per cent understanding that they do not need to use their entire pension pot to purchase an annuity, up from 31 per cent in 2024.

Similarly, awareness that annuities can provide income for a spouse after death increased from 30 per cent to 38 per cent, while 35 per cent recognised that annuities can be used alongside drawdown, up from 30 per cent a year earlier.

Commenting on the findings, Standard Life head of annuities, Pete Cowell, said: “More people approaching retirement now understand what annuities do best: provide a guaranteed income they can rely on.

“With cost-of-living pressures still front of mind, it’s encouraging to see growing awareness of inflation-linked options and how these can protect your income over time.”

However, the research also highlighted several persistent knowledge gaps.

Only a third (33 per cent) of respondents were aware that an annuity can be purchased at any point during retirement, up only slightly from 31 per cent in 2024.

In addition, just 22 per cent understood that certain medical conditions can lead to higher annuity payments through enhanced underwriting, although this was an improvement from 18 per cent last year.

Standard Life noted that its internal analysis showed customers could receive around 9 per cent more income through underwriting, in which health conditions or shorter life expectancy are taken into account.

Cowell observed that demand for annuities has continued to grow as retirees seek to balance flexibility with the security of guaranteed income.

“We’re also seeing some customers use annuities as part of broader estate planning, and our internal data shows around three-quarters of annuity purchases are now made with pension pots over £50,000, compared to 49 per cent at the start of 2025,” he added.

He warned, however, that many people approaching retirement still lack confidence in their decision-making.

“This lack of confidence increases the risk of people drawing down savings too quickly or missing out on options that could provide greater stability later in life,” Cowell continued.

“As the retirement landscape continues to evolve, clear and accessible information about the role annuities can play will be essential to helping them make better decisions and achieve lasting financial security.”

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