Inflation has once again made headlines this week, as the latest figures from the Office for National Statistics (ONS) revealed that the Consumer Price Index (CPI) had risen to a 40-year high of 10.1 per cent.

The rising inflation has added to recent concerns, with analysis from PensionBee suggesting that the latest increases will mean an extra £90,000 is needed in pension savings, and could even throw the reinstatement of the state pension triple lock into jeopardy.

And these concerns may be well placed, as the impact of the rising cost-of-living was being felt even before the latest increase.

Research published this week revealed that more than one in 20 savers plan to reduce pension contributions due to the cost-of-living crisis, while analysis from Penfold showed that the number of savers opting out of pension saving was already up by 29 per cent from March to July this year.

The current backdrop has also left savers vulnerable to scams, with trustees expressing ‘grave concerns’ over members approaching retirement being scammed.

Defined benefit (DB) pension transfers were found to be the main cause for concern, despite new regulations being brought in to help combat the threat of pension scams.

New transfer rules were introduced in November 2021, whereby trustees would have to raise amber or red flag warnings if they felt a pension transfer could be at risk of scam activity, with a guidance session mandatory before a transfer can be authorised when an amber flag is raised.

However, research this week suggested that the practical implementation of these rules could be lacking, with a freedom of information request revealing that nearly half (44 per cent) of scam guidance sessions due to an ‘amber flag’ warning being raised during a pension transfer were conducted without knowledge of the reason for the flag being raised.

Progress is being made though, as the regulator has again flexed its muscles in its latest prosecution against two pension trustees, who recently pleaded guilty to making illegal loans worth £236,000 from a company pension scheme to the scheme's employer.

Staying on the front foot, the regulator also encouraged pension scheme trustees to remain vigilant to investment risk, and ask 'even silly questions' in an effort to drive conversation and understanding.

The bulk purchase annuity market has continued to go from strength-to-strength, with bulk annuity insurers currently reporting the “strongest pipeline of annuity auctions for some years”, according to Aon’s latest UK Risk Settlement Bulletin.

However, there are concerns that this could force pension schemes to compete harder, with questions raised over the extent to which insurers will be able to meet the increased demand, and particular concerns over the constraints stemming from people capacity.

These capacity crunch concerns could also be heightened in light of new proposed DB funding rules, which Mercer warned could accelerate the "demise of defined benefit (DB)" schemes with an increased demand for pension liability buyouts.

In addition to this, LCP has argued that the new rules could risk forcing all schemes into a ‘one-size-fits-all straitjacket’, leading to potential employer insolvencies in some cases.

Trustees are not alone in this environment, however, as guidance has been shared this week to support trustees on the journey to buyout, whilst further guidance was also shared to help DB trustees prepare for the pension’s dashboards.

Despite the current concerns, the pensions industry has made clear that it is ready to rise to the challenge and work together to support savers; whether this will be enough to prevent the cost-of-living crisis from becoming a cost-of-retirement crisis is yet to be seen.

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