LV= confirms RPI-linked annuities will not be reduced

Retirement specialist LV= has confirmed that the announcement today of the Retail Price Index (RPI) falling to -0.4%, taking the UK into deflation for the first time in 50 years, will not affect its annuity customers whose income is RPI-linked. This means those annuitants will not see a reduction in their retirement income.

Matt Trott, LV= Head of Annuities, said: "Some of our annuity products incorporate index-linking, and where the income is specifically linked to RPI, it would normally be expected to reduce in line with deflation. However, we have no current plans to do this. Whilst we always keep the situation under review we are pleased to confirm that none of our annuitants will experience a decrease in income due to the deflation announcement this morning."

LV= noted its concern that living costs for pensioners were not falling as fast as the RPI index indicates, affecting the current purchasing power of pensioners.

Matt Trott commented: "As we are now in a period of deflation, a lower income for RPI linked annuitants would normally mean that the same purchasing power is maintained. However, we currently believe that living costs for pensioners are not falling as fast as the RPI index indicates, and this has reinforced our decision not to reduce the income of any of our annuity customers in the current environment. In addition, our own research shows that pre-retired people are now more concerned than ever about their financial security, with the rising cost of utility bills and food prices the single biggest worry for people facing retirement."