Industry experts have warned that the inflation problem is still not contained, after the Office for National Statistics revealed that the Consumer Prices Index (CPI) 'stubbornly' stayed the same in May at 8.7 per cent, while core inflation rose to 7.1 per cent.

Interactive Investor senior personal finance analyst, Myron Jobson, highlighted the latest CPI figures as a “real shocker that brings the downward trend in inflation to a screeching halt and poses further headaches for the Bank of England ahead of its interest rate decision”.

“Looking past volatile food and energy prices, core inflation rose to its highest level in 31 years, hitting 7.1 per cent - despite the Bank of England’s robust approach to rising rates,” he continued.

"With core inflation proving to be hot and stickier than initial forecasts, it now seems odds-on that the Bank of England will hike the base rate further tomorrow.”

Indeed, industry experts suggested that the move will place additional pressure on the Monetary Policy Committee to increase rates more than anticipated in the coming months, with XPS Pensions Group, suggesting that “today’s news makes it more likely that we will see a 0.5 per cent increase at some point soon”.

XPS Pensions Group chief investment officer, Simeon Willis, also warned that the current levels of inflation can be “very damaging” to pensioner incomes in particular, noting that even where benefits are linked to inflation, annual inflation increases are often capped, for instance to 2.5 per cent.

“This means that whilst inflation remains at this level, the real value of a pensioner’s pension is being substantially eroded,” Willis explained.

“The general inflationary environment has been less of an issue for pension schemes and employers. Long term inflation expectations, which more heavily influence liability values, have been relatively stable.

"Furthermore, for pension schemes with high levels of hedging, capped benefit increases can lead assets to outperform, as inflation hedging assets are usually uncapped.”

These concerns were echoed by PensionBee director of public affairs, Becky O’Connor, who suggested that for older people, it remains difficult to plan retirement, as inflation erodes the value of pension pots.

“Older borrowers who are hoping to pay off their mortgages face an uphill struggle to do so, with higher repayments creating a challenge for some,” she continued.

"For workers who are saving into their pensions, it’s important to keep at it. Stopping contributions to cope with ‘the now’ only stores up problems for the future.

“With interest rates expected to rise again tomorrow, the hope is that inflation responds and falls, soon. In the meantime, people continue to cope, trimming costs where they can, budgeting and prioritising.”

However, the current market could make pensions a more attractive saving option, as Standard Life managing director for retail, Dean Butler, stressed that while the toll on households trying to pay their bills each month is mounting, those with cash-based savings are also starting to see a real dent in the value of their hard-earned accounts.

Given this, Butler argued that, for those able to take a longer-term view, putting cash into investments via an ISA or pension provides the potential for returns that can match - or even beat - current rates of inflation as well as offering additional tax efficient benefits.

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