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Pensioners face 9% inflation, says Alexander Forbes

Inflation has reached 9 per cent on average for pensioners with rises in food, energy, fuel and council tax, according to research by Alexander Forbes Annuity Bureau.

Food prices have risen by an average of 9.1 per cent this year compared to 2007 prices, with fresh food jumping by 10.8 per cent.

Alexander Forbes predicts electricity prices will rise by 9 per cent to 17 per cent this year and gas prices will increase by 22 per cent to 35 per cent, depending on supplier.

Council tax increased this year by a national average of 4.7 per cent, based on a CPI figure last year of 2.3 per cent. On average since 2000 council tax has increased by 5.46 per cent above inflation every year.

Alexander Forbes director David Marlow says: “With the current real rate of inflation likely to be somewhere around the 9 per cent mark, it means that when looking at buying pension income from an annuity, people need to be very aware of the effects of inflation. The vast majority of pension annuities are currently bought on a level basis, which is usually because the starting level of an indexed, or escalating annuity, is considerably lower.

“One alternative is to consider an investment-linked product with part of the fund and a guaranteed annuity alongside. This can provide the security wanted whilst providing a cost effective chance of matching or even beating inflation.”

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