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Increasing income (escalating) or level income each year?

Another factor for consideration is whether you want an income which will remain the same throughout your life, or for the payments to increase each year. Points to consider are: -

1. If you opt for level income the amount may initially seem more attractive as you will be quoted a higher figure, but over the long term inflation etc., could reduce the value in real terms.
2. You can select an escalating annuity where the income will increase by a specified amount each year, for example 3% or 5%, or RPI-linked annuities which keep in line with the RPI.

If Inflation stays low it could take a considerable period of time for an escalating annuity to “catch-up” and pay out as much as a level annuity which starts off much higher.

Your state of health will be a major factor when considering which option to go for (see notes on enhanced annuity rates)

If you would like more information on Increasing or Level Income Annuities click here

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