Retirees with annuities report more satisfaction in life

02 December 2024

A new study reveals that retirees with an annuity report higher satisfaction levels and fewer financial concerns compared to those without one. 

The research from Legal & General in collaboration with the Happiness Research Institute suggests that a stable, guaranteed income can enhance financial confidence, reduce stress, and improve quality of life.

The study highlighted several key differences between retirees with and without pension annuities. For instance, those who opt for an annuity report higher satisfaction with their daily life, relationships, free time and social activities. 

The research also found that:

• Annuity-holders were 51% more likely to experience lower stress levels than those without one.

• Financially, 24% of annuity holders expressed strong confidence in managing their money compared to 21% of those without a guaranteed income. 

• Retirees with annuities were 27% more likely to find their finances predictable and manageable.

• Annuity-holders were 40% more likely to meet regular payments, such as credit card and loan repayments, than those who rely on other income sources. 

Lorna Shah, managing director at Legal & General Retail Retirement, explained: “Too often, conversations around the value of an annuity are limited to rates. However, our findings reveal a clear ‘happiness advantage’ for those with annuities.

“The stability of a guaranteed income gives retirees peace of mind that their money won’t run out, even if they live past 100. It takes the guesswork out of budgeting and lets people focus on enjoying retirement, rather than spending time worrying about their finances.”

Why do people choose an annuity?

The research also looked into the top reasons that savers choose an annuity. It found the most common reason is following a recommendation from an adviser, with 31% of participants citing this as a primary factor. Other motivations included the reliability of regular payments (23%) and the ease of budgeting with a guaranteed income (16%).

Looking at other retirement income options 

Despite these research findings about the positive impact of annuities on life in retirement, prospective retirees may benefit from exploring all their options. While annuities provide the certainty of a steady income stream for life with a lifetime annuity or for a set period with a fixed term annuity, they are not the only options that can support a comfortable retirement. 

L&G’s Lorna Shah notes that an annuity doesn’t have to be a retiree’s only income source, suggesting that it could form part of a blended approach to retirement. She said: “Combining the guaranteed income of an annuity with other sources, such as income from investments or drawdown, can provide even more flexibility, ensuring that essential expenses are covered, while offering the freedom to grow other assets.”

Is an annuity right for you?

Retirement Line’s Annuity Guidance Team is here to help you understand how an annuity could work for you, helping you to make an informed choice about your retirement income. We can provide you with a comparison of the best annuity rates from the UK’s top annuity providers.

For free, no-obligation annuity quotes from leading providers, call 0800 652 1316, request a call back, or email us at info@retirementline.co.uk. 

Source

Retirees with an annuity report higher satisfaction levels and fewer financial concerns: Retirees with annuities have fewer affordability issues. FT Adviser. Accessed 14 November 2024.