Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Inflation remained steady this month, but current geopolitical instability means we will likely see it start to rise in the coming months.
“This will have an impact on everyone, including pensioners, who need to make sure that their pension income is robust enough to see them through inflationary ups and downs.
“Retirees on the lookout for a guaranteed income will find annuities continue to offer good value.
“The latest data from HL’s annuity search engine shows a 65-year-old with £100,000 pension can get up to £7,644 per year from a single life level annuity, with a five-year guarantee.
“This can act as a solid basis for retirement income alongside the state pension, but it’s important to say that level annuity incomes don’t change over time and what might be a good income now may look sorely stretched during a time of high inflation.
“Inflation-linked products are available – one that rises by three per cent per year can give a starting income of up to £5,781 per year.
“This is demonstrably lower than a level product, and you do need to consider how long it will take the income to catch up to that of a level product.
“Income drawdown can play a huge role in helping retirees manage inflation long term.
“By remaining in the markets, it gives their investments time to grow further, though it’s important to say markets can also be volatile.
“A flexible approach is important to make sure you aren’t taking too much out and potentially depleting capital.
“Mixing and matching annuities and drawdown could be a great option.
“You can secure a level of guaranteed income with an annuity and then keep some flexibility when drawing an income from drawdown.
“You can then consider annuitising in stages, potentially securing higher incomes as you age.”
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