Retirees Face 42% Cost Surge Since 2020 as Inflation-Linked Annuities Gain Appeal
Updated
Updated · Pensions Age · Jul 7
Retirees Face 42% Cost Surge Since 2020 as Inflation-Linked Annuities Gain Appeal
1 articles · Updated · Pensions Age · Jul 7
Summary
Standard Life said a 42% rise in prices since 2020 has sharply eroded retirees’ spending power, making inflation protection a bigger retirement-planning issue.
A £100,000 inflation-linked annuity bought in January 2020 would have lifted annual income to £4,050 from £2,900 by March 2026, though it paid just over £21,000 in total versus more than £31,000 for a level annuity.
That trade-off means inflation-linked products are expected to overtake level annuities only after nine to 29 years, depending on future inflation.
Standard Life found 94% of over-50s see inflation as important in retirement planning, yet 48% did not know annuities can include inflation protection.
Level annuities still made up about 80% of annuity sales in 2024/25, reflecting demand for higher guaranteed income early in retirement despite the decade’s cost-of-living shock.