For the average employee, pensions can be hard to understand at the best of times.
So talk of annuities can simply compound the problem.
With a wide range of annuities now available for those in defined contribution (DC) plans, it is not surprising staff can find the choice overwhelming. That is if they realise they have a choice at all and don’t simply have to buy the annuity offered by their pension scheme provider.
And how many scheme members understand that disclosing certain medical conditions or lifestyle factors, such as smoking or alcohol intake, will result in better annuity rates?
With more employees joining a pension scheme because of auto-enrolment, their lack of understanding of annuities is likely to become a growing issue.
Employers are not obliged to educate staff about their options at retirement, but many leading organisations take steps to do so. Those that can afford it may provide access to an independent financial adviser. Others might host a financial education workshop to talk staff through the advantages of shopping around.
Some even begin pre-retirement education years ahead of employees’ planned retirement to enable them to switch between investment options to achieve a better outcome from their fund.
This might add yet another item to employers’ already-overflowing to-do list, but the endorsements they are likely to receive from staff, and the reputational benefits, could mean it is well worth it.
Follow Debbie Lovewell on Twitter: @DebbieLovewell