The impact of inflation on workplace pensions

This video was recorded on 20 September 2022. 

The cost-of-living crisis is having a huge impact on people and businesses. But what impact is high inflation having on workplace pension schemes, both defined benefit (DB) and defined contribution (DC)?

For DB schemes, the news is generally positive. Benefits are protected, in terms of the amount paid out to members in a high inflation environment. Plus, members benefit from an increase in interest rates that tends to happen with high inflation; the increase in government and corporate bond yields means the value of scheme liabilities goes down. In addition, assets have generally been holding their value over the last few months.

"Paradoxically, a bit of inflation is good news for defined benefit schemes."
Simon Taylor Partner, Barnett Waddingham

For DC schemes, the situation is more negative. For example, many employees, particularly lower paid ones, are looking at reducing or even stopping their pension contributions as saving for retirement goes down the priority list. Also, during periods of high inflation, it’s not as feasible for investment returns to keep pace with inflation. So, people will see lower than anticipated pension values, which particularly affects those approaching retirement.

Join our experts, Matt Tickle, Simon Taylor and Paul Leandro as they discuss the issues in more detail ahead of our Employer DNA broadcast on 20 October 2022.

Survive to thrive

How organisations boost their resilience and spend smarter will shape their future success. Watch the broadcast and hear from our expert panellists as they look at the challenges ahead.


Stay up to date

Follow latest independent commentary and exclusive insights from a range of experts at the forefront of risk, employee benefits, pensions, investment and insurance – tailored to your preference.

Subscribe today