Inflation data from the Office for National Statistics shows that the year-on-year consumer price index in the UK rose from 2.6 per cent in June to 2.9 per cent in July.
The 13 per cent increase to Ofgem’s energy price cap effective from 1 July was attributed by industry professionals as a key contributor to rising inflation, as well as ongoing geopolitical crises such as the war in Iran.
Despite the inflationary headwinds, DB scheme funding continues to be supported by an upwards trend in nominal gilt yields. According to analysis by XPS Group, aggregate surplus as of 14 August 2026 remains well above £240bn.
However, for some members the impact of inflation caps within defined benefit scheme structures could mean some retirees see their real income eroded even as headline funding levels remain strong.
Josh Pilley, head of multi-asset research at XPS Group, says: “Trustees and sponsors should closely monitor their scheme’s risk exposures to ensure that hedging strategies remain robust against potential future volatility in both gilts and inflation markets.”
Core inflation, which does strip out energy and food costs, also proved stubborn although remain unchanged from July at 2.6 per cent.
Jonathan Raymond, investment manager at Quilter Cheviot, says: “A renewed spike in inflation has been expected as the war in the Middle East continues to navigate a clunky ceasefire. Things remain far from normal in the Strait of Hormuz and look unlikely to be resolved any time soon, meaning pressure is likely to remain on prices for the remainder of the year at least.
“That said, inflation is expected to moderate in the coming months as government activities begin to take effect on the headline number. Cuts to VAT on energy bills and discounted leisure and hospitality offerings will begin to feed through in official numbers, but unlikely at the pace needed by the Bank of England to feel safe to start considering rate cuts.”
The latest data does decrease the likelihood of further Bank of England interest rate cuts this year, with a rate increase an increasing possibility.
Kevin Brown, savings expert at financial mutual Scottish Friendly, also claimed that expensive fuel and fertiliser are adding pressure to food production and supply chains, while an exceptionally hot summer raises another threat to harvests.
