Leading annuity provider, LV=, confirms that annuity income is safe as the Retail Prices Index (RPI) slumps. This relates to those customers who have a RPI-linked annuity income, and it means that they will not be affected by the RPI’s tumble to -0.4%, which takes the UK into deflation for the first time in half a century. The annuity provider has confirmed that its customers will not see a cut in their retirement income despite the slump.
Some of LV=’s annuity products incorporate the index-linking option, and where the income is specifically linked to the RPI, that income would normally be expected to reduce in line with deflation. However, they have no current plans to make this cut, commented Mark Trott, their head of annuities.
They will continue to keep the situation under review but are pleased to confirm that currently none of their pension annuity planholders will experience a decrease in their important annuity income due to the deflation figures being witnessed. They have concerns that the living costs for retirees are not falling as fast as the RPI index suggests which is affecting the purchasing powers of retirees. In a deflationary times, a lower income or RPI-linked annuities would normally mean the same purchasing power is carried on, but LV= think it is the right decision not to reduce the income of any of their annuity customers in the current environment.
In addition, some research carried out by LV= found that pre-retired people are now more concerned than they have ever been about their financial security. The rising cost of utility bills and food prices are really the biggest worry for those facing their retirement.
As far as LV= are concerned, annuity incomes related to the RPI are okay for now, but are they a good buy? Yes, they protect against inflation, but at what cost to income. When seeking out the best annuity rates, look for a selection of annuity quotes and you’ll see what I mean.
