They were in Sheol, which had many levels, from Paradise at the uppermost level, otherwise known as Abraham’s Bosom, down to the lowest depths, where the rebellious angels and evil spirits were bound. The rich man was in a much lower level, tormented due to the darkness and the accute awareness of being separated from God, but could see Lazarus.
Doesn’t argue for annihilation.
It is also a “pre-christianity” viewpont.