While most large funds made increases of around 4% this year, according to Aon Consulting, many company estimates for increases next year had been 3%.
Marcus Hurd, head of corporate solutions at Aon Consulting, said: “The cost of providing increases to UK pension schemes is likely to be around £25bn, of which only £15bn would have been budgeted based on company estimates of a 3% inflation rise.
“RPI is a key benchmark figure for pension increases and most pensions are required by legislation to increase in line with inflation, subject to a maximum of 5% on pensions earned between 1997 and 2005.”
However, according to research from Alliance Trust, many pensioners will not benefit from a 5% increase as the inflation rate for those aged over 75 jumped to 7.8% in September.
It attributed this to gas prices increasing almost 50% over the last year, electricity prices rising by 30% and food prices by 13%.
Furthermore, it said that the under-30s are the only age group to face inflation lower than the official rate.
These figures are calculated by estimating that over-75s spend 7% of their budget on electricity and gas bills, whereas the under-30s households spend just 3%.
The 75-year-old age group also allocate 16% of their household budget to food, compared with less than 9% for the under-30s households.
Those under 30 benefited from falling prices on clothes and audio-visual goods, which form a bigger share of their spending.
David Rowley
