Type of annuity

On retirement, the choice of annuities may seem vast. You can simply get a level annuity, offering a fixed amount of income every year for life. However, life expectancy means this income might have to last 20 years and inflation could eat away at its value. So you have a choice. First, there are index-linked annuities which increase with inflation, protecting your income's worth. Or there are escalating annuities, increasing at a pre-set rate (say 5% pa). Finally, for the adventurous, there are investment-linked annuities, where income is based on the performance of assets. Each has its merits, but as you can't change your annuity once you've bought it is sensible to consider them all.

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