CPI Inflation remains at 6.7%

CPI Inflation remains at 6.7%

18 Oct 2023

Private sector defined benefit pensioners are set to lose out in real-terms for the second successive year as a result of the continued high inflation levels and the caps applied to members’ pension benefits. 
 
With pension caps typically ranging between 2.5% and 5%, respective September CPI and RPI inflation figures of 6.7% & 8.9% will mean another year of real losses for the majority of the over 4 million scheme pensioners where these caps bite.
 
In particular, and although the impacts will vary significantly based on the actual caps in place, we estimate that an average defined benefit pensioner could be left missing out on c.£300 a year or around £5,000 over the rest of their lifetime.
 
Henry Shore, Consultant at XPS Pensions Group, commented: “With this morning’s announcement that the annual rate of CPI inflation has remained unchanged over September, the key takeaway is one of short-term inflation remaining high and contributing to the cost of living crisis.
 
XPS’s DB:UK funding tracker estimates that schemes currently have over £170bn of surplus funds on a low-risk basis. Consequently, some schemes are exploring the possibility of providing discretionary pension increases to support members that will see a second consecutive year of real falls in their retirement incomes. This also feeds into the ongoing debate on the Mansion House reforms and how changes to legislation could enable more flexible use of surpluses.”