Level Annuity Income

Last updated: 20/03/2014

When you buy an annuity with your pension funds, you will have an option of choosing either a level annuity income or one that increases over time.

A level (or fixed) annuity pays you the same amount of income year after year for the rest of your life.

The major disadvantage is that the buying power of the annuity income will be eroded over time by the effects of inflation.

To provide protection from rising prices, you can instead chose to receive an escalating annuity income which rises by a set percentage each year or an inflation proof annuity income which rises by RPI each year.

Annuities with a level annuity income have a higher starting income than annuities with either an escalating annuity income or inflation proof annuity income.