We bust the most common myths on pension annuities

It pays to consider annuities before retirement

One in five people (20%) believe annuities are only something to consider after retirement. This perception is stronger in Northern Ireland, where almost half (45%) think this, compared to just 15% in Scotland.

The Myth: Annuities are only available once you’ve stopped working.

Mike explains: You don’t have to wait until retirement to secure an annuity. Some fixed-term plans are available from age 55, so you can plan ahead while still working, or add one later to suit your needs. Many people choose a combined approach, using part of their pension pot for a guaranteed income to cover essentials and keeping the rest in drawdown for flexibility. 

Our fixed term plans —sometimes referred to as a Fixed Term Annuity (FTAs) — can be used as a bridging product, to help you transition until other benefits like the state pension start. It’s all about flexibility and choice to suit your needs. Learn more on our Fixed Term Plans.

How annuities can continue after you’re gone

Around 17% of people think buying an annuity means the money disappears when you die. Men are slightly more likely to believe this (20%) than women (15%). The belief is highest in Norwich (29%) and lowest in Edinburgh (12%).

The Myth: Annuities can’t be passed on after death.

Mike explains: Many annuities include options to protect your income for loved ones. Features like guarantee periods, value protection, or a joint-life option can mean payments continue after your death, giving additional reassurance. It all depends on the product features you choose upfront.

Read our guide on Annuity types, to better understand how your options can ensure your legacy passes on value to those you want to protect.

Annuities are simpler than you think

Two-thirds of people have a good understanding of how annuities work, despite the perception they’re too difficult. But myths persist—especially around flexibility and control.

The Myth: Annuities are overly complex and inflexible.

Mike Explains: The principle behind annuities is straightforward—you exchange some or all of your pension savings for a guaranteed income. But here’s the good news: you don’t need to use all your pension pot. You can annualise part of your savings, leave the rest invested, or consider a Fixed Term Plan to keep future options open.

These choices highlight that annuities can be more flexible than people think, and guidance or advice can help identify what’s right for you. Explore Fixed Term Plans.

The right annuity can create real value for your retirement

About 21% of people believe annuities are too expensive, with no difference between men and women (both 21%). This concern is highest among those aged 45–54 (29%), compared to 19% of people aged 55 and over. In Belfast, over a third of respondents (35%) share this view.

The Myth: Annuities offer poor value for money and aren’t worth considering.

Mike Explains: How much value you get from an annuity depends on your individual circumstances, retirement goals, and the type of annuity you choose. While they’re not for everyone, annuities can deliver peace of mind by providing a guaranteed income throughout retirement.

Lifetime annuities provide a steady income for life

Only 35% of respondents correctly linked a lifetime annuity with a guaranteed income for life. Men understood this better (43%) than women (28%), while those over 55 are more likely to know the truth than those aged 45–54. Many people confuse this with flexible drawdown or lump sums.

The Myth: Annuities don’t provide a steady income—and you need to lock in your entire pot.

Mike Exlains: A lifetime annuity’s defining feature is security—it provides an income you can’t outlive. You don’t have to commit your entire pension pot either; you can use part of it and keep flexibility elsewhere. Your annuity also pays on a monthly basis, helping to replace the structure of a monthly salary in retirement and making budgeting easier.

It won’t suit everyone, but as part of a wider retirement income plan, an annuity can add guaranteed stability.