Standard of living - minimum, moderate or comfortable figures released today (12 January 2023)

OldMusicGuy

Albermarle said:

I think you can get annuities with an automatic fixed increase every year, regardless of inflation. 3%, 5% etc
So you would probably win some years and lose others, although it could swing either way.
I think these are a bit cheaper than a full RPI link, as the provider is not dealing with unknowns. 
Presumably though they are more expensive than RPI with a cap.
Maybe a good compromise ?

I've just used half my DC pot to buy an RPI linked 50% spousal annuity. The rates on offer were too good to refuse IMO (over 4%), even though I'd not planned to consider an annuity until I was 75 at least (I'm 66). I did a lot of running of the numbers and a fixed 5% annual increase was more expensive than an RPI linked annuity, 3% IIRC was about the same. I wanted the risk protection of RPI linked, and getting a base of RPI linked income was very attractive to me (I have no DB pension).

Albermarle

OldMusicGuy said:

Albermarle said:

I think you can get annuities with an automatic fixed increase every year, regardless of inflation. 3%, 5% etc
So you would probably win some years and lose others, although it could swing either way.
I think these are a bit cheaper than a full RPI link, as the provider is not dealing with unknowns. 
Presumably though they are more expensive than RPI with a cap.
Maybe a good compromise ?

I've just used half my DC pot to buy an RPI linked 50% spousal annuity. The rates on offer were too good to refuse IMO (over 4%), even though I'd not planned to consider an annuity until I was 75 at least (I'm 66). I did a lot of running of the numbers and a fixed 5% annual increase was more expensive than an RPI linked annuity, 3% IIRC was about the same. I wanted the risk protection of RPI linked, and getting a base of RPI linked income was very attractive to me (I have no DB pension).

Thanks for the info. Presume it will become CPIH linked as from 2030 ( assuming the proposed changes actually go ahead )?

OldMusicGuy

Albermarle said:

Thanks for the info. Presume it will become CPIH linked as from 2030 ( assuming the proposed changes actually go ahead )?

Good question - the contract is silent on any potential switch. I will check with the provider. CPIH seems most likely.

zagfles

OldMusicGuy said:

Albermarle said:

Thanks for the info. Presume it will become CPIH linked as from 2030 ( assuming the proposed changes actually go ahead )?

Good question - the contract is silent on any potential switch. I will check with the provider. CPIH seems most likely.

AIUI RPI will still be published, it's just the method used to calculate it will be the same as CPIH, so the "flawed" method which currently gives slightly higher values for RPI will no longer be used.