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Products - Guaranteed Life Annuity - Escalation Expansion™

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The Science of Escalations

When choosing a Paramount Life Guaranteed Annuity, you are given the option that your income increases by any percentage between 0% and 10% or CPI% per annum.

The escalation option selected is one of the primary factors affecting your starting annuity income.

For a given lump sum, the higher the escalation selected, the lower the starting income but the higher the long term income. These escalations are typically applied on an annual basis.
In practice, the lower starting income has acted as a disincentive for individuals to purchase an annuity with an escalation. This means that in many cases inflation quickly erodes the annuity value.

Introducing Escalation Expansion

The Paramount Life philosophy of enhancing and simplifying retirement income has been applied to the introduction of Escalation Expansion.

You are no longer restricted to escalations being applied on an annual basis. Escalation frequency can now be chosen between 1 and 10 years.

By reducing your escalation frequency you are able to enhance your starting income while receiving a similar Rand value over the duration of your annuity.

Expanding a 5% Escalation
Expanding a 3% Escalation
 
Escalation Frequency
Every year
Every 2 years
Escalation
5%
10%
Starting Income
R5 839
R6 037
Total Income over 15 years
R125 997
R126 313
 
As a result of the expanded escalation frequency:
§  the starting income is 3.4% higher
§  the total income received over 15 years is 0.25% higher

 

 
Escalation Frequency
Every year
Every 3 years
Escalation
3%
9%
Starting Income
R6 915
R7 189
Total Income over 15 years
R185 815
R186 369
 
As a result of the expanded escalation frequency:
§  the starting income is 4.0% higher
§  the total income received over 15 years is 0.30% higher
 

*Based on a 65 year old male accountant earning R10 000 per month; non-smoker; no medical diagnoses.

For more information or to request a quotation call 086100 2027 or email info@paramountlife.co.za
 
 
 
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