Eight in ten adults yet to retire unclear what an annuity is, reveals Which?

In May 2026, Which? surveyed a nationally representative sample of 2,000 UK adults about their understanding of common pensions terminology. The survey revealed widespread misconceptions about how pension schemes work, including lack of understanding about auto-enrolment, the support available to pension savers, and how and when private pensions can be accessed. With defined contribution (DC) schemes increasingly commonplace, many savers will need to make a decision about how and when they choose to access their retirement savings.

Worryingly, the majority of respondents who had not yet retired were unclear about how a DC scheme works, despite it being the most common type of workplace pension. Unlike a defined benefit (DB) scheme, it does not guarantee an income for life. Instead there are multiple ways of accessing this money, including taking some or all of it as cash, purchasing an annuity or using drawdown. Only one in seven (14%) of those who had not yet retired correctly identified ‘a defined contribution pension is a type of pension that pays out a guaranteed income for life’ as a false statement. More than a third (36%) said it was true and half (50%) said they didn’t know.

Similarly, Which?’s survey revealed that eight in ten (79%) respondents who had not yet retired are unclear about what an annuity is. Half (52%) said they didn’t know, and a quarter (27%) incorrectly confused it with equity release, saying that ‘an annuity is a type of mortgage that lets you access money tied up in your home’ was a true statement.

Currently, you must be 55 to access your private pension savings, rising to 57 from 2028. However, around half (51%) of pre-retirees surveyed didn’t identify 55 as the current age at which you can access your private pensions. While most people don’t retire at 55 - the average age people stop working is around 65, according to government figures. Knowing your target retirement age is essential to making sure your savings are on track, and ensuring that you’re investing with an appropriate level of risk.

The survey also revealed confusion about whether an annuity can be passed on if you die. One in six (17%) pre-retirees correctly identified ‘If I have an annuity, my loved ones will always get some money when I pass away’ as a false statement. A third (35%) incorrectly said it was a true statement. Almost half (48%) said they didn’t know. Savers also have the option to withdraw up to 25% of their pension as a tax-free lump sum, but more than half of respondents who had not yet retired (54%) got this wrong or were unsure.

As well as confusion around when and how to access pension savings, the survey revealed similar misunderstandings about paying into a pension. Just four in ten respondents who had not yet retired (42%) correctly identified that when you save into a pension, the government chips in through tax relief. Four in ten (42%) didn’t know, and one in six (16%) thought the statement was false.

There were similar levels of misunderstanding around salary sacrifice, with just four in ten (41%) pre-retirees aware that this way of contributing to a workplace pension reduces your national insurance liability. Eight in ten respondents who hadn’t retired (82%) didn’t know that you must earn above a certain limit to be auto-enrolled in a workplace pension scheme. Some six in ten (58%) pre-retirees wrongly thought that an employer must enrol you in a scheme regardless of how much you earn, and a further quarter (24%) were unsure, responding ‘don’t know’. In reality, there are eligibility criteria for auto enrolment, including being at least 22 years old and earning at least £10,000 per year before tax.

Jenny Ross, Which? Money Editor, said:
“Knowledge is power, and understanding how your pension savings work is the first step on the road to a successful retirement plan. However, our research has shown millions of people across the UK are unsure about how and when they can access their pots, casting doubt on their financial security in retirement.
“With the shift towards defined contribution schemes placing more responsibility onto the individual to make use of a finite pot of savings, many people are being left in the dark. The government and the financial services industry must step up to simplify retirement communication, and with the advent of pensions dashboards, ensure that straightforward, accessible guidance is readily available.”

-ENDS-

Notes to editors:
-Which? surveyed a nationally representative sample of 2,000 adults in the UK, of which 1,737 were not yet retired. Fieldwork was carried out online by Deltapoll in May 2026. The overall data has been weighted to be representative of the UK population (aged 18+).
-Those not yet retired refers to those 18+, including workers, job seekers, students, and those continuing to work beyond pension age.
- With confusion and worry about pensions and retirement rife, Which? is expanding its free advice, and is working with HUB Financial Solutions to offer consumers access to retirement specialists who are able to give people the guidance they need to plan their retirement income.
-Find free Which? guidance on planning for retirement here.

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