Adrian Boulding is the Managing Director at Arboreum Pensions, this week he put this on linked in. It make a lot of sense to me as the CEO of Pensions Mutual.  Both Arboreum and Pensions Mutual expect to be delivering collective (CDC) pensions in 2027.

November 12, 2026

Inflation bobbed up last month, with UK CPI rising to an annual rate of 3.5% from its previous value of 3.1%. If your shopping basket contains the same goods and services that ONS use to define CPI, then what cost you £100 a year ago now costs you £103.50.

Of course, not everything in the basket behaves the same, and transport, particularly petrol and diesel, was the biggest driver of the increase in annual inflation. Restaurants and hotels provided the largest offsetting contribution, helping to limit the rise. So, if you walk out to lunch your own personal inflation rate was probably less than 3.5%, whilst if you drive to work it was probably higher than that much quoted 3.5% average.

But the pattern of inflation is a pretty inexorable up, up, up! Even when inflation falls – hailed as a welcome relief in the media – it does not usually mean prices are falling. If annual inflation drops from 3% to 2%, prices are still higher than a year earlier, just rising at a slower annual pace. Previous price increases have not been undone. In fact they are still being added to.

2015 was the last year in which annual CPI inflation turned negative. It first dipped below zero that year in April, at −0.1%. September and October also recorded −0.1%, making October the last negative annual reading. It’s now over ten years since we had an annual reduction in prices across the board.

That dip was short-lived. The CPI index regained its October 2014 level in May 2016 and exceeded it in June. Since then, year on year price changes have all been upwards.

These percentage price rises compound over time, really hurting anyone on a fixed income. Consider 25 years—a plausible length of retirement. In Autumn 2001, the ONS recorded an average price of 37p for a pint of milk. Tesco currently lists a one-pint bottle at 85p. This compares a historical national average with one retailer’s price today but illustrates how everyday costs can change over a retirement.

The Pensions Commission are concerned, and they cite FCA market data that reveals that around 80% of annuities sold in 2024/25 were level annuities, paying the same guaranteed amount each year for life, without annual increases. As the milk example illustrates, inflation erodes that income’s buying power over time: the payment stays the same, but it buys less.

This is why the new CDC pensions are targeting annual increases that over the long run will keep pace with the cost of living, or even better. They target this both in the growth phase and the retirement phase. Savers of every age may expect to see the purchasing power of their CDC pension contributions maintained while they are building up towards retirement, and again while they are receiving their monthly pension income during retirement.

OK, with CDC it’s a target not a guarantee. The actual increases could be higher than inflation or lower than inflation, and if the scheme’s experience is very bad, pensions could even be reduced. But I think it’s comforting for members to know that the Trustees that are running the plan, the Actuary that’s costing it and the Investment Manager that’s picking the stocks all have one aim in mind – to preserve the long-term purchasing power of CDC pensions decade after decade.

Adrian Boulding

All views expressed are my own and not those of any of my employers