Bad news for pensioners as 10.1% inflation puts older Britons at risk of ‘brutal exposure’ | Personal finance | Finance

Inflation has topped 10% for the first time in 40 years, according to the Office for National Statistics (ONS). Recorded at 10.1% in July, the population is now under significant pressure due to the cost of living crisis.

The problem can be compounded for retirees who have made choices about how to collect their income.

One option that has steadily risen in popularity once again is the annuity.

An annuity provides Britons with a guaranteed regular income in retirement.

Often, instead of relying on stock market highs, individuals can retire and purchase an annuity upon retirement.

Mr. Selby pointed out that people generally buy annuities without inflation protection.

Although in recent years this has not necessarily been a problem, with a further spike in inflation it could create a serious problem.

He continued: “This means that these people risk being suddenly exposed to the price spike.

“In the 2020/21 tax year, approximately 85% of the 60,000 annuities purchased were ‘level only’. This means that they had no inflation protection.

“Only 15% of purchased annuities were ‘increasing’, meaning they increase with inflation.”

With a life annuity, the decision is irreversible once the purchase is made – and the Brits won’t be able to change their minds later.

Therefore, regardless of the economic climate, it is worth shopping around for the best annuity deal.

The government-backed MoneyHelper website says individuals should understand the different options available.

This will help them know:

  • When they will receive income
  • how much they will get
  • What they can protect
  • Who they can potentially provide for when they die

The website added: ‘If you need help figuring out how and when you can access your pension pot, you can talk to someone at Pension Wise, a free Money Helper service.

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