The Consumer Price Index rate of inflation increased 2.9 per cent in the 12 months to the end of August 2017.

This was an increase of 0.3 per cent on July, up from 2.6 per cent. The Office for National Statistics said rising prices were the main contributors to the increase in the rate between July and August 2017. Air fares also rose between July and August but the rise was smaller than between the same two months a year ago and so resulted in a partially offsetting, downward contribution.

Commenting, Barnett Waddingham senior consultant Malcolm McLean said: “Inflation is now at its highest level in five years. Rising prices for clothes and motor fuels were the main contributors to the rise. The figures sent sterling shooting higher, presumably on the basis that the Bank of England may now be willing to contemplate an interest rate rise.

“Next month’s figures will be used to determine the annual increases in pension and benefit levels. In terms of the triple lock on the state pension it seems likely that price inflation, as measured by the CPI, will exceed both wage inflation (currently running at 2.1 per cent) and the 2.5 per cent underpin.

“It is also interesting to note that the Retail Prices Index (RPI) 12-month rate in August 2017 was 3.9 per cent - good news for members of occupational schemes with RPI ‘hard-wired’ into their scheme rules and those retired people with annuities providing RPI-based increases”.

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