How inflation challenges pensions

Inflation has reached levels not seen in the last four decades in most OECD countries, hitting disproportionally the most vulnerable, low-income households. This policy brief discusses how high levels of price inflation challenge pensions. The role of minimum wages and of working-age benefits in the current inflation context are the focus of two other OECD policy briefs (OECD, 2022[1]; OECD, 2022[2]). Although the situation differs greatly between countries, a general policy response to temporary high inflation should be to fully protect at least the most vulnerable pensioners. Some low-income pensioners are suffering and need an emergency response, which may include advancing scheduled updates of benefits. Indexation of benefits to changes in prices, wages, or to a mix of both, matter greatly for pensions.