Inflation has continued to rise over the past month, with the latest figures from the Office for National Statistics revealing that the Consumer Prices Index (CPI) increased 11.1 per cent in the year to October, up from 10.1 per cent in September.

Despite the increase in inflation, XPS Pensions Group pointed out that liabilities of defined benefit (DB) pension schemes have fallen by just over £60bn year-on-year, as expectations of longer-term inflation are lower than this time last year.

However, the group warned that “lower levels of inflation can’t come soon enough”, acknowledging that many businesses are facing significant headwinds, with corporate insolvencies in October 2022 nearly 40 per cent higher than this time last year.

XPS Pensions Group senior consultant, Charlotte Jones, commented: “Most DB pension schemes are doing well in the current climate - XPS’s DB:UK funding tracker estimates that schemes currently have over £40bn of surplus funds following a sustained period of rising gilt yields, despite the market turmoil seen in recent months.

“At XPS we’re seeing schemes working with companies to explore additional pension increases and support their pensioners through the cost-of-living crisis. In contrast, the level of company insolvencies in the UK is increasing.

"Trustees need to continue to monitor the financial strength of the companies supporting their pension schemes, particularly as the recent falls in pension scheme assets could mean that for some schemes long-term security is still a long way off.”

The continued increase in inflation could also prove detrimental to pensioners purchasing power, as XPS noted that there are around 4.5 million pensioners receiving DB pensions that are unlikely to keep pace with inflation due to inflation caps in place.

Concerns have also been raised around the state pension, as Canada Life technical director, Andrew Tully, noted that while those reliant on the state pension may be pinning their hopes on the Chancellor re-committing to a double-digit increase through the triple-lock promise, “even then this will hardly match the price rises pensioners are experiencing”.

This was echoed by Barnett Waddingham self-invested pensions technical specialist, James Jones-Tinsley, who noted that even if the triple lock is reintroduced as rumoured, "pensioners will still suffer a real terms drop in their state pension for the second year running".

Recent research from My Pension Expert also suggested that savers’ confidence in their savings could be in jeopardy amid the volatility, revealing that over a quarter (26 per cent) of Brits aged 40 and over no longer have confidence in their pension due to the economic turbulence.

“Something must be done to alleviate this crippling financial pressure,” My Pension Expert CEO, Andrew Megson, stated, suggesting that “all eyes will be on the Chancellor tomorrow, with the hope that he can provide some much-needed reassurances to struggling pension planners”.

“Finally giving a clear answer regarding the future of the triple lock would be a step in the right direction. However, such action alone will not be enough,” he stated.

“The government must provide long-term support to help Britons better understand their financial situation and make informed choices to protect their money.

"Prioritising the launch of the pension dashboard would certainly help to achieve this. So too would working with the regulators to ensure Britons know where to turn for affordable independent financial advice.”

“These are very concerning times for pension planners. And it is vital that the government acts swiftly and decisively; any further u-turns regarding pension policy could come as a slap in the face for pension planners. And in doing so, we might start to see Britons’ confidence in their finances begin to be restored.”

Quilter tax and financial planning expert, Rachael Griffin, also pointed out that inflation is expected to climb further still in the coming months, warning that "it is unlikely that a fall in inflation will materialise any time soon".

“All eyes will be keenly watching the Chancellor as he lays out his long-awaited Autumn Statement tomorrow, during which he will outline the government’s plan to fill the current hole in public finances,” she added.

“The freezing of various tax thresholds and allowances for an additional couple of years is widely anticipated as the Chancellor looks to take advantage of rising inflation.

“While anything is possible tomorrow, if the government opts to rely on continuing high levels of inflation as expected, it would likely be a safe bet. The dip in inflation seen back in August looks to have been a fluke, and it is unlikely that a fall in inflation will materialise any time soon.”

Adding to this, Simon-Kucher & Partners, managing partner, James Brown, stated: “The question being asked across the country is whether we have peaked or whether this headline number will continue to rise. The big fear amongst policy makers will be a wage-price spiral.

“There are definitely still price increases to come – as firms who have held back or attempted to absorb more of their own cost increases now feel the pressure to pass this on – but falling demand in many areas as spending power falls will mean firms need to be far more targeted about where and how these price increases are implemented.”

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