The effect inflation could have on your annuity
If you select an annuity which pays a fixed income over the period of your retirement (level annuity) you will see a reduction in the real value of your pension as a result of inflation. As life expectancies rise and people are living longer in retirement this reduction could cause problems as inflation has the affect of reducing the relative value of your retirement income.
There are options to counter the effect of inflation such as an inflation linked annuity. An inflation linked annuity enables the income you receive in retirement to rise and fall in line with a measure of inflation such as the retail price index (RPI). Another option could be an escalating annuity that increases by a set % over time. These types of increasing annuities may be suitable options to conciser when choosing you retirement solution.
As with all retirement decisions it is important to seek annuity advice from an Independent Financial Adviser. They will be able to guide you through the process to make sure you have answers to your questions and choose the most appropriate retirement option. Contact us today and we can help you find the best annuity advice.
Find out more about the different types of increasing annuities, Inflation Linked Annuities and Escalating Annuities.