BBC Radio 4's Money Box has reported that some pension annuities linked to the Retail Prices Index (RPI) would be cut if inflation fell below zero. Some providers are reported to have said they will reduce payments on index-linked pension annuities. Among these are Axa, LV, Partnership, some of Standard Life's annuities, some of Prudential's annuities. Norwich Union, MGM, and Legal and General are reported to have said there would be no reduction.
It is thought that pensions paid to retired public sector workers will be frozen if RPI falls. The situation is thought to be the same with most company pensions; although some may cut pensions.
The news is less bad for people with a state pension. The government has promised that the basic state pension will never rise by less than 2.5% which means an increase of at least £2.40 in April 2010 even if inflation is negative this September.