Almost three quarters (73 per cent) of retirees do not fully understand key pension terms such as 'annuity', with pension jargon seen as a “barrier” to pension planning, research from Legal and General (L&G) has found.

The survey, conducted amongst retirees aged 45 to 75+, found that the majority (80 per cent) of retirees did not fully understand the term defined benefit (DB) scheme and 82 per cent did not fully understand the term defined contribution (DC) scheme.

Meanwhile, almost three in 10 retirees (29 per cent) do not fully understand basic terms like state pension.

Additionally, around one in five (22 per cent) stated that complicated terminology was an obstacle to researching pension plan options.

The research pointed out that this issue was more common among people in their 40s and 50s taking early retirement, who reported they were most confused about complex jargon and an overload of information.

Commenting on the findings, Sheffield University professor of economics, Alberto Montagnoli, said that a good understanding of pension terms was “vital” to a secure financial future.

“It’s worrying to see that financial terms are misunderstood,” Montagnoli continued.

“This could potentially lead to individuals failing to plan appropriately for their retirement. We need to make financial language easier for everyone to understand.”

To help people navigate pension income jargon, L&G announced that it has created a tool, Deciding How To Use Your Pension, including explainers, links to PensionWise and guidance.

It was designed to help retirees get the best from their pension income.

L&G Retail managing director retail retirement, Lorna Shah, added: “Clarity of pension terminology and the options available at retirement are key to effective planning.

“We are committed to providing clear, accessible information and resources to guide our customers towards informed decisions.

“Across our website and content, we have made a conscious effort to reduce the use of pension jargon to make it more accessible.”

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