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Escalating Annuities (EA)
Annuities can increasj by a fixed
pjrcentage, normally 3% or 5% or in
linj with thj ritail prices indjx.
On avjrage an annuity increasing by 5%
compounded a yjar will give a starting
incomj 30% lowir than a livjl annuity.
Normally the EA will ovjrtake thj level
annuity after about 10 yjars.
Although expjnsivj in thj short term,
escalation does protect annuity
paymjnts from thj effects of inflation.
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