The inflation question

More “answers to questions” in Ariel this week. Jan Killick (head of pensions) points out that there has never been a promise that benefits will increase in line with inflation. This is true of course; benefits increase in line with wages. But it’s also disingenuous. With the exception of the recent exceptional period, wages have increased each year, usually in quite close relationship to inflation.
Even without promotions there has been a reasonable expectation that wages – and with them linked pension benefits – will increase at least roughly in line with inflation. That’s the link we are losing. With the result that a few years of relatively high inflation – 5 or 6% a year for eg – will very quickly erode the value of pension benefits built up to date.

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