More control over inflation

Anonymous · 2 upvotes

At the moment, it appears that when you enter an inflation rate, that rate is applied consistently throughout the whole projection. Even where alternative inflation assumptions can be selected, they seem to apply across the entire period rather than to a defined period.

It would be really useful to be able to model a temporary period of higher inflation — for example, 5–6% for 2–3 years — followed by a return to the longer-term assumption of, say, 2.5%.

A temporary period of higher inflation has a lasting impact. Once prices have increased more rapidly for a few years, they don’t return to where they would have been simply because inflation subsequently falls back to normal.

For example, it would be useful to have something like:

• Normal inflation: 2.5%
• Higher inflation: 5.5%
• Duration: 3 years
• Thereafter: revert to 2.5%

The model could then show the impact of that temporary inflation shock on the required retirement income and the longevity of the pension pot.

From the Isaac team: Spot on. A few years of high inflation leaves prices permanently higher, even once it falls back, and a single flat rate misses that. We're adding the option to set a higher rate for a number of years before it returns to your long term assumption. Thanks for the suggestion.