The insurer polled 2,000 UK adults aged 50 and over and used the findings to launch “Annuity Myth Busters”, a guide to common misconceptions about when an annuity can be bought, what income it can provide and what happens after death.

The survey found Scots are among the best informed on some key points. Only 15% believe annuities are available only once you have fully stopped working, compared with 20% across the UK. In Edinburgh, 12% believe annuity funds are lost on death, the lowest of any UK city, although 17% UK-wide wrongly believe funds cannot be passed on. A quarter of Edinburgh respondents found annuities “complex”. 

Across the UK, only 35% correctly identified a lifetime annuity as the retirement option that guarantees an income for life, although L&G said around two thirds of respondents understood the basics of annuities.

The top myths L&G identified were that annuities:

• do not provide a reliable retirement income
• are too complex to understand
• are only for retirees
• are lost when you die
• offer poor value for money

On value, about 21% of those surveyed said annuities are expensive. L&G said value depends on personal circumstances, the rates available, the features chosen and the alternatives compared. It said annuities may not suit everyone but can offer financial security and certainty about monthly income.

L&G explained that an annuity lets you exchange some or all of your pension savings for a guaranteed income, either for life or for a fixed term. You do not have to commit your whole pot, and can keep the rest invested for more flexibility. Some annuities can continue to support a spouse, partner or beneficiary through guarantee periods or joint-life options, either as continuing income or a lump sum, though these features may reduce the starting income.

Mike Batty, L&G’s managing director for lifetime mortgages and strategy director for retail retirement, said: “People often recognise the value of a guaranteed retirement income, but many are unsure about how annuities work. Misconceptions about flexibility, timing and what happens after death can make an important decision feel even more complicated.”

He added that guaranteed income “can lessen anxiety for retirees” and said L&G wanted to help people “understand their options and build a retirement plan that reflects their individual needs”.