Advisers urged to plug knowledge gap in annuity market

Advisers urged to plug knowledge gap in annuity market

Advisers have been warned of a knowledge gap in the annuity market, with 53 per cent saying their clients had heard of the product but had little understanding of them.

Research from Primetime Retirement showed 39 per cent of advisers said their clients know what annuities are, but that they have numerous misconceptions.

Just 20 per cent said their clients were often opposed to taking out the product.

But 71 per cent of advisers thought there were enough resources available for retirees to make an informed decision about their retirement, the research showed.

The research found 98 per cent of advisers said having a guaranteed income in retirement was important to their clients, suggesting fixed-term annuities should play an even greater role in clients’ retirement plans.

Kim Lerche-Thomsen, chief executive and founder of Primetime Retirement, said: "A lack of education and engagement when it comes to pensions is one of the biggest problems facing the industry.

"Despite continued efforts across those in Government, industry experts and providers in tackling the issue, a clear knowledge gap still exists.

"Even though the majority of advisers believe there are a plethora of resources available for retirees to make informed decisions, a lack of understanding among consumers remains the issue."

Ms Lerche-Thomsen said a negative perception of fixed-term annuity products was causing consumers to make the wrong retirement choices.

"Advisers are clear that security of income in retirement is one of the most important factors for retirees," said Ms Lerche-Thomsen.

"Retirees should be looking to use lifetime and fixed-term annuities as part of a blended retirement portfolio.

"However, many have a negative perception of these products or no knowledge at all, meaning there is a danger of these individuals sleepwalking into other options, such as drawdown. Advisers can play a huge role in raising awareness of the features and benefits of annuities among their clients and ensuring they find the best retirement solution to meet their needs.”

Nathan Long, senior analyst at Hargreaves Lansdown, said: "Few people are ever encouraged to make confident financial decisions during their working life, so it’s hardly surprising there is a lack of confidence and understanding when retirement arrives.

"This hasn’t been helped by a relentless stream of negative sentiment towards annuities, not least from George Osborne during his now infamous speech.

"Our own research shows that plenty of people crave the security of guaranteed income, just not at any price. Advisers should be encouraging people to get an enhanced annuity quote to compare their options fully as over half of retirees now qualify for better rates due to their health or lifestyle."

Ricky Chan, director and financial planner at IFS Wealth and Pensions, said there were enough resources to help people understand annuities and the solution was for people to seek financial advice.

"The Government has already set up PensionWise and there are various free resources online for people to do their own research," said Mr Chan.