The CPI increased to 9.1 per cent meanwhile inflation expectations have lowered UK defined benefit long-term liabilities by about 0.2 per cent over the past year, according to XPS Pensions.
The Bank of England predicts that by the end of this year, annual CPI may reach 11 per cent, and this is because short-term inflation has experienced sharp increases.
In order to safeguard schemes against such swings, this gives members bigger annual benefit increases, which puts pressure on liability hedging measures.
Meanwhile, retirees can expect a 10 per cent increase in their pensions following government announcement that the state pension triple lock, which guarantees increases based on inflation, average salaries, or 2.5 per cent, will be reinstated in 2023.
XPS Pensions Group senior investment consultant Felix Currell says: “Against a backdrop of rising prices and tightening real wages, it is a tough time for schemes looking to invest, with the World Bank predicting a worldwide economic contraction. At the same time, with rates significantly behind inflation levels, ‘safe’ assets are also of limited appeal.
“We have historically seen long-term equity investors rewarded for riding-out bear markets but would recommend that clients seek advice on how their investments can be structured to best manage their objectives.”