There are 4.5 million pensioners receiving defined benefit pensions which are unlikely to keep pace with inflation due to caps in place.
The level of these caps vary from scheme to scheme but when applied could mean the equivalent of £35bn of pension income is lost in real terms across all private sector UK defined benefit schemes.
Charlotte Jones, Senior Consultant at XPS Pensions Group, said: “Most defined benefit 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.”
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