Jurisdiction(s):
United Kingdom

Managing high inflation in UK DB and DC pension schemes: trustee actions on communications, governance, indexation, revaluation, early retirement, transfer values, funding, investment and employer covenant

Published by a LexisNexis Pensions expert

Practice notes

This Practice Note examines how high inflation affects defined benefit (DB) and defined contribution (DC) pension schemes and sets out actions trustees should consider taking.

Impact for defined contribution (DC) schemes

For DC arrangements, high inflation places a greater burden on members than on trustees or the scheme provider. The main effect is on retirement income—for the following reasons:

active and deferred members — where contributions are expressed as a percentage of pay, their real value can diminish if a member’s salary is not increased in line with inflation over time. Furthermore, unless investment returns broadly keep pace with price rises, the projected retirement income of members still building their pension pots will be negatively affected. This may lead some members to postpone their planned retirement date
members approaching retirement — such members typically switch to lower-risk investment strategies, for example bonds and cash holdings. However, this approach may do little to offset the impact of high inflation. Individuals nearing retirement should carefully consider how they might counter inflation without taking on an inappropriately high level of investment risk

As explained by the Pensions Regulator, DC members who are...

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Web page updated on 21/05/2026

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