The Office for National Statistics (ONS) confirmed that the Consumer Prices Index (CPI) rose by 4.6 per cent in the 12 months to October 2023, down from 6.7 per cent in September, and the lowest rate in two years.

Industry experts suggested that this fall in inflation was “sorely needed”, with PensionBee director of public affairs, Becky O’Connor, suggesting that it could mark “mark the beginning of the end of the cost-of-living crisis, although prices are still high and the painful effects of this difficult period will continue to be felt for some time".

“For those trying to preserve the long-term value of their life savings, including their pension, returning to lower inflation is absolutely vital,” she continued.

“Retirees have been struggling to make their pensions last in the face of the recent bout of ultra-high inflation; while workers trying to boost their future pension pot have faced an uphill battle to maintain the real future value of their savings.

"A return to more normal economic conditions will be a boost to financial resilience and security and may enable people to start reprioritising planning, rather than just getting by.”

However, Aegon warned that the fall in inflation could increase the pressure on the government’s state pension triple lock decision, explaining that, if honoured in full, state pensioners could potentially receive an increase of double the ruling rate of inflation next April.

Aegon pensions director, Steven Cameron, explained: “The official formula would grant an 8.5 per cent increase, based on year-on-year earnings growth for the May to July period. This is further above inflation than we’ve seen in recent months.

"With rumours of the Chancellor having more fiscal headroom than anticipated, the government may decide to grant the full 8.5 per cent, providing another bumper increase after this April’s highest ever 10.1 per cent. But this is paid for out of the National Insurance of today’s workers and raises real questions around intergenerational fairness.

“There have been reports that the government is considering adjusting the earnings growth figure downwards to take out the impact of recent one-off public sector bonuses which have created a ‘distortion’."

However, Cameron warned that while trimming it back to say 7.8 per cent would save the government hundreds of millions, "it risks the wrath of the pensioner population ahead of an almost certain General Election next year".

“With the government already having more than met its target of cutting inflation by half by the end of the year, the current 4.6 per cent remains significantly above the Bank of England’s 2 per cent target, so the headline rate may fall even further as we head into the early months of 2024," he continued.

"This means there’s a real chance that a state pension increase of 8.5 per cent could be more than double the ruling rate of inflation come next April. That’s unsustainable."

Given this, Cameron argued that whatever the decision for next April, volatile price inflation and earnings growth add to growing concerns that the triple lock in its current form is unsustainable longer term.

"Prior to the General Election, we’re calling on the main parties to make clear their proposals to make it sustainable, reliable, and intergenerationally fair," he added.

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