Inflationary slowdown continues
Inflationary slowdown continues
15 Feb 2023
The latest CPI figures this morning showed that the growth of inflation continues to slow, whilst longer term expectations of inflation, which DB pension schemes are particularly interested in, have also fallen 0.4% over the past year. In isolation, this long-term slowdown has reduced liabilities by £80bn according to XPS’s DBUK funding tracker. However, record inflation levels over the past year have likely more than offset this reduction, with the realised impact of inflation over 2022 adding an expected £100bn to pension scheme liabilities.
Charlotte Jones, Senior Consultant, XPS Pensions Group, commented: “The slowdown in inflationary growth is good news for pension schemes and should provide them with more stability in the longer term. However, the impact of unprecedented inflation levels over the past year is still being felt by some DB pension schemes that are continuing to review early retirement factors and pension increases in response.”
Notes:
XPS DB:UK Funding Watch monitors the combined deficit and funding level of UK defined benefit (DB) pension schemes (i.e. all registrable schemes - including hybrids) on a long-term target basis using a discount rate of Gilts + 0.5%. It combines XPS’s market leading Member Analytics and the award-winning journey planning tool, Radar, enabling real time monitoring of changes and analysis of the reasons behind any movement.
An online version of XPS DB:UK is available here:https://www.xpsgroup.com/services/xps-pensions/xps-dbuk-funding-watch/