Those who are thinking of purchasing an annuity should think carefully about the relative effects and risk of inflation. Asset-backed pension annuities are one avenue that retirees may want to consider, according to Aston Goodey, who is the Sales and Marketing Director at MGM Advantage. It is argued that these types of annuity will help annuitants avoid the danger of rising prices impacting on their spending power. Goodey says that…”…increasingly, they will need to take more proactive steps to tackle the risk of inflation through, for example, asset-backed annuities that keep some funds invested in the stock market.”
Because pensioners tend to be on fixed incomes, rising prices have an adverse impact on their income. However RPI linked annuities are not without their dangers, especially if inflation does not increase, you may end up worse off when compared to a conventional annuity or one without escalation. Also remember that your starting income will be lower as a consequence. Whatever your decision, it is always best to seek independent advice and to shop around between pension providers.
