What is an Escalating Annuity?

I’ve been looking into buying an annuity and an escalating annuity comes up time and time again. I was just wondering what an escalating annuity is and whether it’s the same as an index-linked annuity?

Question asked by Mr S Shah
Compare Top 10 Annuity Rates
 
Takes approx. 60 seconds
Pension Fund
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327334
Our in-house Experts are here to provide Whole of Market Advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at
Smoker

Answered by Michael Englefield

What is an Indexed Annuity?

You’re right in that an escalating annuity is the same as an indexed annuity or an index-linked annuity.

To go back to basics, an annuity is a regular income you receive after retirement. You buy this income by exchanging your defined contribution pension pot for an annuity when you decide to stop working.

What is an escalating annuity?

How much income you’ll get from an annuity is based on your annuity rate. This is determined by a number of different factors, including your age, location, smoker status and whether you have any medical conditions.

Something else that will have an impact on your annuity rate is whether or not you opt to index-link your annuity. When you choose an escalating annuity, you’re opting for your pension income to rise over time in line with inflation. This is to prevent a fixed retirement income being eroded over time as prices rise.

Consider that annuities are typically long-term financial products that you may be receiving income from for decades. Then consider how much a pint of milk cost 30 years ago compared with now – it’s increased from 23.9 pence in 1986 to 42.7 pence by 2016.

When you buy an indexed annuity you typically receive a lower initial income, but this is to compensate for the fact that your pension will increase in the future along with inflation.

Annuity
 
Pension
 
Indexed annuity
 
Escalating annuity
 
Retirement
 
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.
Compare Top 10 Annuity Rates
  Takes approx. 60 seconds
 - 
Need help? 
Call us on 

Frequently Asked Pensions Advice Questions

 
I’ve been reading about the different types of retirement annuity available and one option I’ve...
 
I have a couple of company pensions from previous employers but I’m not sure how well they are...
 
A friend told me I should think about ‘income drawdown’ now that I’m in my late 50s....
 
I’ve been saving into a final salary pension for all of my working life. My neighbour is about...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Martin Johnson
24/04/2019

A simple policy well explained good impartial advice and knowledge done with a smile! Many thanks.

Julia Bickley
19/04/2019

I found the service very friendly, professional and those I spoke to were clearly knowledgeable and explained things in an appropriate way. Great communication, and very personable staff. I would use again without a doubt.

Valerie Graham
17/04/2019

Excellent – very helpful and knowledgable. No sell, just education and assistance. Would highly recommend!

We are rated 4.9/5 based on 2159 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.92 / 5 Average
2159 Reviews
W Liu
Overall Rating
I am a customer from US. We just set up UK subsidiary. We need some help with insurance plans there. Drewberry is very helpful, especially Nadeem. He is great
V Mashru
Overall Rating
Have dealt with Robert Harvey for many years now for my insurance needs. Always incredibly helpful and finds the right cover that’s appropriate for me. Nothing is ever too much. I appreciate it he help and advice.
J Norbury
Overall Rating
Jake Beale was really professional, helpful and informative.
I Capital Ltd
Overall Rating
Nadeem Farid was very helpful and consistent in setting up our company group insurance. service was efficient at all times. thank you
R Elliott
Overall Rating
Excellent knowledge and support. Also always available which was refreshing