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Deflation hits annuities

Inflation-linked annuity clients could see their income fall after the retail price index fell below zero for the first time since 1960.

Providers such as Prudential, Standard Life, Partnership and Just Retirement say some people will be hit by RPI deflation which now stands at -0.4 per cent.

Less than 10 per cent of annuities are inflation-linked and a small proportion do not have a floor option which means they will be affected by deflation.

LV= says it will not be cutting income on its RPI-linked annuities and Axa also says deflation will not affect its customers.

Standard Life has 6,000 pensioners with an RPI-linked annuity without a floor and Pru has 9,000 clients in this position.

Standard head of pensions policy John Lawson says: “It would not be treating customers fairly to introduce a floor for customers who have not paid for it.”

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