Compare Friends Life Annuities To Get Maximum Retirement Income!
If you want the pension/income to increase each year then you can do this. However, once again the amount of pension you will receive initially will be lower than one which does not increase. It is possible to choose the level of increase at the outset and the most common levels of increase are 3%, 5%, and RPI linked (inflation).
This is generally considered an expensive option because of the impact on your starting income. It can take many years before you 'break even'.
If you select an income that does not increase, you will generally receive a much higher initial income than an annuity that does increase. However you should bear in mind that, as time goes by, the real value of your income will be eroded by the effects of inflation.
Increases (Fixed or Inflation?)
If you are worried about the
effect inflation may have on your retirement income, you can choose for your income to move in line with the Retail Prices Index (RPI) which means your income will keep track with inflation and therefore retain its buying power.
The retail price index inflation was 3% for the 12 months ending May 2006. It takes 14 years for the 3% increasing pension (£2,210) to reach the level annuity (£3,185). You have had less money for the first 14 years and it takes a total of 25 years to break even.
The percentage shows the amount from the maximum. Based on a healthy male, aged 60, £50,000 non-protected rights fund, with a wife aged 57
Source: The Exchange 21 June 2006
You can also choose a fixed percentage increase each year such as 3% or 5%.