An Increasing Income
Also known as escalation. Your income will increase each year, either at a fixed percentage rate or in line with an index such as the Retail Prices Index (RPI).
- Pros: An escalating annuity will increase over time, so the effects of inflation are offset, either in full or up to a fixed percentage each year. If you live for many years after you retire, your annuity will be in payment for a long time which means the total income payments may exceed those of a non-escalating annuity.
- Cons: Your initial income will be less than that of a non-escalating annuity and it may take some time before the total amount accumulated from an escalating annuity exceeds that from a non-escalating annuity.