Older employees who are nearing retirement age on final salary deals could be in for a shock as surging living costs outpace rises in their incomes, experts at XPS Pensions Group have warned.
They said that while many private sector Defined Benefit pensions (DB) increase in line with inflation, often this is subject to an annual cap, commonly set at 5%, however with inflation rising above the caps - currently at 7% - pensions could soon lag behind as the figure is expected to climb higher in the coming months.
Steve Leake, a partner at XPS Pensions Group, explained: "Private sector DB pension benefits often increase in line with inflation but a lot of increases are capped at 5%.”
