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Two thirds of older couples fail to take out joint annuities

Almost two thirds of over 65 couples are failing to take out a joint annuity because they do not understand what it is, according to Aviva.

The firm’s Real Retirement Report found that two thirds of people do not realise that being overweight or a smoker increases annuity payouts. It found that the average annuity pot is just £27,207 and the average lump sum taken is £4,338.

More than 8.5 million over 55s are jeopardising their retirement income through a “worrying level of ignorance” about annuities, Aviva says.

The report, which reviews the finances of the three ages of retirement 55-64; 65-74 and over 75, found that the majority of people do not take out joint annuities and are unaware of what affects annuity payouts.

The average income a woman derives from her annuity is £99 per month and the average man derives £151.

Women take out annuities on average aged 59, slightly earlier than men whose average is 62 years. But both start drawing an annuity significantly sooner than they have to by law.

Only 4 per cent of those over 65 believe they derive an income from an annuity while 14 per cent feel they derive an income from a personal pension and 19 per cent from an employer pension.

Aviva says this “shocking statistic” serves to highlight the fact that most people do not understand the role an annuity plays in retirement financing.

While widely available, only 29 per cent of married people under 65 take out a joint annuity and 41 per cent of married people over the age of 65. Aviva says this is due to a serious lack of understanding with 54 per cent of consumers over 55 not knowing what a joint annuity is.

The report found that most retirees and pre-retirees choose standard annuities as they do not realise that health conditions could make them eligible for an enhanced annuity and an increased annuity income.

Head of annuity propositions Darren Dicks says: “At Aviva we understand that many retirees are facing challenging times, so we want to equip them with the tools and knowledge to give them the best possible retirement.

“By considering their full range of assets – including pensions, investments and property – we can help people have the lifestyle they deserve in their later years.

“However, we also know from our research that many find retirement planning confusing – particularly when it comes to annuities. With legislation making it compulsory to purchase an annuity before the age of 75, it is worrying that people over 55 know so little about them. This lack of knowledge could see some people settling for a far lower income than they are entitled to or others finding that their income dries up all together when their partner dies.

“The type of annuity a person chooses can impact on their standard of living for more than 30 years so it is vital that they understand as much as they can about these products before making a choice. We seriously recommend that people research their options via a financial adviser or an annuity provider.

“A little knowledge could really make a difference and increase a person’s retirement income by up to 10 per cent.”


The long range

It was Woody Allen who said “I recently turned 60. Practically a third of my life is over.” Far-fetched maybe but not an impossible dream. I have become a little obsessed by longevity of late – maybe it’s my age. But the more I have researched the subject, the more intrigued I’ve become. Consider the […]

Minor characters

Rounding off my series on intestacy with a look at trusts holding assets for spouses and children.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Given that it is usually the male who receives the quote from his pension provider and his options are not spelled out properly I am not surprised at this figure.

  2. Don’t worry the FSA have a fiendish plan for these clients. Its called the bancassurers! After the decimation of 10,000 good men and women code named “RDR dust bin” blue collar workers are to be passed over to the very same banks that the FSA failed to regulate and who as we speak are responsible for 59% of FOS complaints compared to existing (sson to be scraped IFA’s) at less than 3% .
    Future clients could of course go to the highly qualified New Model Professional adviser who will be quite happy to charge these low paid blue collar workers a fee for their time, especially when they learn that the average UK pension annuity fund is £24K and that the fee charge will be the equal of their own daily wage and in some cases weekly wage!
    The other alternative being the new Conservatives £50m fund paid for by IFA’s so that they can get paid themselves!! Wake up and smell the coffee – commission is the solution. It didn’t just arrive it evolved.

  3. How much rope would be required?

  4. David Trenner - Intelligent Pensions 10th February 2010 at 3:10 pm

    Unless I am mistaken Aviva is a member of the ABI. Can I suggest that Aviva gets its trade body to issue ‘wake up’ letters which spell out how much extra clients could get from the OMO, and how important it is that they take advice?

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