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You need to weigh up whether you think you will live long enough to
benefit from the protection against inflation offered by an increasing
annuity. Your income requirements may reduce as you become less active
in older life and so a level annuity may work well for you in a low
inflation economy, but should inflation dramatically increase you may
find the purchasing power of your annuity reducing rapidly.
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We have developed a special
forecasting tool which shows the difference between the
income from both level and increasing annuities and
calculates how long you would have to live before the
increasing option is providing better value. |
A level annuity pays the same income each year for the rest of your
life. The main drawback with a level annuity is that what you can buy
with the income falls as prices rise through inflation
Level annuities pay a higher starting income compared to increasing
annuities. Think carefully about the effect of inflation. Could you
really cope with having no increases at all in your annuity income
during your retirement, which could last 30-40 years?
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