446735002-Pension-Fix-by-Martin-Lewis

Escalating annuities
Income grows with inflation.
Inflation – the measure of the rise in the cost of living – can have a detrimental
effect on your income after you retire. Even an inflation rate as low as 3% would
lead to a pension being halved in real terms in 23 years from when you retire.
This would mean someone retiring aged 60 would see their spending power
sliced in two by the time they’re 83.
So, whether you want your annuity to increase with the cost of living is
another important consideration. Many suffered in the 1970s when inflation
soared to 25% because while prices rocketed, their income remained fixed.
You can choose a conventional annuity that is linked to a measure of inflation
like RPI or set it to rise by a set percentage each year – say 3% or 5%. These are
inflation-linked or escalating annuities.
Alternatively, you can link your annuity to the stock market through an
investment annuity and pray your pension income will increase in the long run.
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