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Inflation Protection for Job Changers in UK

When workers covered by traditional defined benefit pension plans change jobs before retirement, their benefits are fixed based on their wages at the point they leave their plans. Inflation that occurs from that point until the workers are eligible to receive pension benefits erodes the real value of their pension benefits. Workers are protected against this loss in the United Kingdom. British pension law requires pension plans either to provide inflation adjustment of benefits during the period between leaving a job and the first receipt of benefits or to transfer the workers’ benefits to a central clearinghouse. The inflation adjustment is equal to the rate of increase in the consumer price index, up to 5 percent annually. If inflation exceeds 5 percent, workers are not protected against the full extent of inflation.

For further information on revaluation.

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