CPI this morning reached 9.0%, as inflationary pressures seen over the last few months continue.
Early retirement pensions are reduced to reflect the longer period of payment, typically by around 4% a year.
In addition, due to differences in the way inflationary caps apply before and after retirement deferred members who have not yet retired from final salary private sector pension schemes may benefit from delaying early retirement decisions.
Analysis from XPS Pensions Group’s DB:UK Funding Watch shows that if inflation reaches 10%, for an average member, the effects of the caps from delaying an early retirement decision by one year could be worth £400 a year.
This could mean they were over £10,000 better off over their lifetime.
Charlotte Jones, Senior Consultant at XPS Pensions Group, said: “As inflation continues to bite we could see more pensioners taking the difficult decision to delay their retirement in order to boost their future income in this high inflationary environment. This could have a beneficial impact on their pension income, as the effects of caps on pension increases tend to be more significant once pensions are in payment.
“Our calculations show that the effects of the caps could improve the average pension scheme member’s income by £400 each year if they can afford to delay taking their pension for a year.”