Inflation eats into the real value of your annuity income. High inflation in particular can reduce what you can buy on a fixed income that has not risen to keep pace with inflation.
A solution is to arrange for your annuity income payments to increase each year.
To offset the effects of inflation, you can choose to increase your annuity income payments in line with the Retail Prices Index. Because this tracks the average change in certain goods or services bought in the UK, it protects the buying power of your annuity income. If you wish, you can instead increase your annuity income payments by a fixed amount each year – typically 3% or 5% per annum.
Again, you should bear in mind that arranging annual increases to your annuity income will lower the annuity income you will receive from the start. One of our Annuity Specialists will be only too happy to provide you with a breakdown of the annuity figures so you can make an informed decision.