The additional amount needed to keep budgets on an even keel this year is collectively £19bn, analysis by MGM Advantage, the retirement income provider, has found.
The figures were calculated on the back of new data supplied by the Office of National Statistics, which showed the consumer price index rose by 2.9 per cent in June, up from 2.7 per cent in May.
Aston Goodey, director of sales and marketing at MGM Advantage, said inflation could wipe half the value of a client’s annuity over retirement.
He said: “This could be a serious problem for the vast majority of people who retire each year and choose a level income from their annuity. These issues have created demand for alternatives, including considering the advantages of investment-linked annuities, which can help minimise the corrosive effects of inflation.”
Mr Goodey said the main drivers of inflation were rising prices for utilities and food, something over which policymakers have “little control”.
|Jock Cassidy, director of London-based Ashley Law, said the potential detriment caused by rising inflation to annuities varied from client to client. He said: “It depends on the age of the potential annuitant. If they are relatively young, inflation will have a tremendous effect on income, so I would advocate index-linked annuities for them.”|