# What is an inflation-linked annuity?

> Quick answer · Last updated 4 July 2026

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## In short

An annuity where income rises each year with inflation (RPI, CPI or a fixed percentage). Starting income is lower than a level annuity but purchasing power is protected long term.

Level annuities pay more today; escalating annuities protect against rising living costs.

Some policies cap annual increases.

Compare quotes for both shapes via open market option.

## Related

- [Buying an annuity guide](https://moneyguide.org.uk/pensions/buying-a-pension-annuity-guide/)
- [Drawdown vs annuity](https://moneyguide.org.uk/pensions/drawdown-vs-annuity/)

## Primary source

gov.uk/tax-on-your-private-pension/what-you-can-do-with-your-private-pension-pot

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.