Covid-driven inflation fluctuations mean those with inflation-linked pensions need to "hold their breath", Aegon has said, as the latest Office for National Statistics (ONS) figures showed further increases in July.

According to the ONS, the Consumer Prices Index (CPI) inflation rate had risen by 1 per cent year-on-year in July, up from 0.6 per cent in June.

Aegon pensions director, Steven Cameron, noted that the impact of Covid-19 and the resultant lockdown measures are “making it hard” to predict inflation figures at a crucial time.

He explained that the next few months’ figures will be “critical” for pensioners, as public sector pension increases are based on CPI figures to September published in October, whilst state pensions increase by the triple lock, which again uses the September inflation figure.

Cameron added that there is an expectation that inflation will “nose dive”, highlighting the Bank of England’s Monetary Policy Report, which stated that it may drop to minus 0.3 per cent for the year to August.

He continued: “If both inflation and earnings growth are particularly low or even negative, the underlying 2.5 per cent guaranteed increase will come at a significant cost to the government on top of their other Covid-19 bailout measures and put significant pressure on the future of the triple lock.

“While a bigger inflation increase compared to last month may raise hopes, pensioners will need to hold their breath to find out what future months hold in store.”

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