Alice has been in a defined-contribution pension scheme since she was 35 and will retire in one year’s time at age 66. Her salary is currently £55,000. Throughout her enrolment in the scheme, she has paid in 8% of salary, and this has been topped up by employer contributions and tax relief worth 4% of salary. She will also qualify for a state pension of £9,000 per year. 1.1 If Alice uses her whole pension fund to buy an index-linked annuity, how much income will she receive in her first year of retirement?

Alice has been in a defined-contribution pension scheme since she was 35 and will retire in one year’s time at age 66. Her salary is currently £55,000. Throughout her enrolment in the scheme, she has paid in 8% of salary, and this has been topped up by employer contributions and tax relief worth 4% of salary. She will also qualify for a state pension of £9,000 per year. 1.1 If Alice uses her whole pension fund to buy an index-linked annuity, how much income will she receive in her first year of retirement?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.2IP

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