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 FREE impartial 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’m worried I won’t have enough money in my pension savings when I stop working, so I’m...
 
I’ve had a with-profits pension for sometime and it’s value hasn’t really changed....
 
I’m approaching retirement age. I’ve heard about deferring my state pension, but I’m...
 
Could you explain to me what a temporary annuity is? I’m looking into buying an annuity for retirement...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Robert Eldridge
07/06/2018

Rauri was easy to talk to. Explained everything really well. Took prompt action when requested and was in touch when he said he would be without being pushy.

Attila Mako
07/06/2018

Excellent service. Oliver was very helpful and patient with me. He gave me knowledgeable advise describing the product details clearly. His communication was prompt and precise! Great customer service!

Ian Brett
26/05/2018

Josh made a complicated process easy and I was kept informed throughout. I will be recommending Drewberry to every one who asks and even those who don't.

We are rated 4.9/5 based on 1512 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.92 / 5 Average
1638 Reviews
D Gianfreda
Overall Rating
Friendly, efficient and professional service
T Bullock
Overall Rating
Friendly and professional
l kelham
Overall Rating
Excellent service, clear communication and advice
B Weller
Overall Rating
Very thorough service
E Portingale
Overall Rating
I had a short time to ensure I was covered appropriately due to change of circumstances and house move. I required a number of insurance policies for my new situation. I contacted Drewberry Insurance and found that they understood all of my needs and the best way to filter and sift appropriate insurers. They clearly understood the process...made everything very easy online and via telephone and always did as they said they would by actioning everything as and when requested. This took the time and confusion away from becoming insured. Their interaction and communication and explanation of all processes ensured I understood each stage of the process. Will recommend their services to anyone seeking insurance.