The Bank of England has moved to control inflation by increasing its base rates – it predicts this will bring inflation below the target within three years. However, in reality, there is a wide range of views on the potential outcomes.
If you are concerned about the potential impact of rising inflation on your pension, we would like to reassure you that the Scheme is being carefully managed to minimise risks where possible.
The Trustees regularly review the funding and investment arrangements, to respond to market conditions and wider economic factors.
How it affects your pension
If you’re a defined benefit (DB) member, the amount of your pension shouldn’t be affected by changes in investment markets. If you’re receiving your pension, this will continue to be paid in full.
The amount of money you get usually has some inflation protection, for example, a cap on the annual increase, which means your pension increase will be limited during periods of high inflation.
If you have a defined contribution (DC) pension and want to retire now or in the near future, you should think carefully about how you want to take your retirement benefits.
If you’re thinking about taking cash lump sums as and when you need them, you should consider whether the amount you would like to draw down will be sustainable in the long term, so that you don’t run out of cash in your retirement. If you’re thinking about buying a fixed (non-increasing) annuity, make sure you consider the impact that high inflation will have on the real value of your annual pension over time.
Get good advice
You may want to talk to an independent financial adviser about how much money you should be drawing down from your pension pot, and the best time to do this. Not sure where to start? MoneyHelper is a useful resource to find out more about your options.
The Pensions and Lifetime Savings Association (PLSA) has published UK Retirement Living Standards with the aim of giving people an idea of what retirement could cost, depending on their salaries, households and savings.
