Should I opt for an index-linked annuity?

Do index linked annuities rise with inflation? Are these generally the best annuity to go for?

Question asked by Kay Rivers
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Answered by Tom Conner

Like a conventional annuity, index-linked annuities are designed to provide you with a regular income in retirement.

However, index-linked annuities ensure that your income increases each year in line with inflation, so that your spending power keeps pace with the cost of living.

You income is usually linked to the Retail Prices Index (RPI), one of the government’s measures of inflation.

Drawback of index linked annuity

One of the drawbacks of going for an index-linked annuity is that initially your income is usually much lower than it would have been if you’d gone for a level or fixed annuity.

If inflation remains low, then it could take some time for an index-linked annuity to pay the same or more income as a standard annuity, although later on your payments should end up higher than the payments you’d get from a level annuity.

Always seek professional financial advice if you aren’t certain which annuity to go for. We are here to help and can provide this advice if needed.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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