Despite an increase in annuity sales amid high rates and interest in guaranteed income, research from YouGov has found that most over-50s do not know how annuities work or how they could benefit.

The research, shared as part of the UK's first-ever National Annuity Day (21 October), revealed a "major gap" between what people want in retirement and their understanding of how annuities can provide it, warning that this lack of knowledge could leave millions financially vulnerable, particularly women.

In particular, the survey of 2,058 over-50s found that more than a third want a “steady and stable” income but do not recognise annuities as the way to achieve it.

Gender differences were also highlighted, as the survey found that 52 per cent of women (vs. 46 per cent of men) prioritise “comfort and freedom,” yet few realise annuities can offer this security.

In addition to this, 13 per cent of women understood that annuities can include inflation protection, compared to 26 per cent of men.

The campaign highlighted these findings as evidence of the need for targeted advice to address the persistent gender pension gap and lower financial engagement.

The National Annuity Day initiative, created by Pension Potential (part of Punter Southall), and supported by Aviva, Legal & General, and Standard Life, is one way in which the industry is working to close this knowledge gap by educating people and supporting advisers and providers in reaching those who could benefit most.

However, the group said that there are also broader opportunities for the pensions industry to close knowledge gaps, suggesting that this could also help to reduce the gender pension gap and help more people achieve financial security.

In particular, the group said that the industry could promote a blended approach to pension savings, publish gender-based data on annuity participation and payment, highlight longevity benefits for women, and position annuities as a good fit for lower-risk investors.

Pension Potential managing director and National Annuity Day founder, Steve Butler, said: “The survey highlights a clear mismatch between what people want in retirement and what they understand about how to achieve it.

"Many over 50s are seeking comfort, stability and predictability, exactly what annuities are designed to provide, but understanding of these products is low.

“This lack of knowledge, particularly amongst women, risks people missing the financial security they desire. By educating the public and supporting advisers, we can help people see annuities as a practical, low-risk way to boost retirement income.

"Closing this knowledge gap will help more people achieve financial security and peace of mind in later life.”

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