Inflation-proof retirement income

If spouse benefit causes your initial income to drop, it will drop even further if you build in a spot of inflation-proofing, with the income diminishing in proportion to the greater amount of ‘proofing’ you require.

The standard annual percentage increases are three per cent, five per cent or a direct link to the Retail Price Index (RPI), - which is the ‘true’ rate of how money loses its purchasing power.

If you like the idea of inflation-proofing your retirement income, then most IFAs would recommend the RPI option. Taking the five per cent option will choke back your income, but if inflation rises above five percent, you’re losing out. The RPI option means you have an absolute guarantee that the purchasing power of your annuity income will keep pace with inflation.