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Unexpected UK inflation drop could be good news for employers with defined benefit pensions

Following the UK inflation rate reaching a near four year high in May, official figures released today (18 July) show an unexpected drop for June.

Quantum Advisory, which has five offices across the UK, including Amersham, Birmingham, Bristol, Cardiff, and London, provides pension and employee benefits services to employers, scheme trustees and members.

Stuart Price, Partner and Actuary at Quantum Advisory, said: “The decrease in inflation from 2.9% to 2.6% was not predicted, but I suspect it will be welcomed by UK companies which have a defined benefit pension scheme.

“When valuing defined benefit pension scheme liabilities, one of the things taken into account is the investment markets long term view of inflation.

“Pensions generally increase each year in line with inflation, but the unforeseen decrease could mean a lower value is placed on defined benefit liabilities. Although early days, this could see the deficits of UK defined benefit pension schemes reduce, albeit by a small amount.”


Stuart Price, Partner and Actuary at Quantum Advisory