The advantages of escalating pension products for investors

pensions

Despite their poor take-up thus far, escalating pensions can help to maintain living standards in retirement, and if there is a long-term inflation rise the current price of RPI-linked annuities could prove to be a bargain

Escalating pensions do not appear to be that popular among those that have a choice in the matter. Of the annuities written with Just Retirement, fewer than 5% have selected escalation in line with the Retail Prices Index (RPI). Many people don't have a choice for all or part of their benefits. This is because: protected rights accrued prior to 6 April 1997 must escalate in payment by RPI, 3% or fixed 3%; protected rights accrued after 5 April 1997 must escalate in payment by the lower of RPI or 5%, otherwise known as Limited Price Indexation (LPI); occupational scheme benefits accrued aft...