Millions of Brits face £7,000 hit to pensions because of rising inflation – with cost of £400 this year alone

MILLIONS of Brits face a £7,000 hit to their pensions because of a failure to match payouts against inflation.

More than four million former private-sector employees will feel the knock on effect of a flawed cap on increases.

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It means a large number of OAPs will lose on average £400 this year – and £7,000 in their lifetime as the cap won’t keep up with inflation increases.

Defined benefit schemes pay out a set amount each year depending on length of service – with a benefits raised by a maximum of five per cent per year, even if inflation is higher.

Retired private sector workers signed up to one of more than 5,000 traditional DB schemes will miss out on hundreds because of the cap.

Inflation levels are expected to surge by up to 10 per cent this year – meaning pensioners on the schemes will lose out.

Steve Leake, an actuary with XPS Pensions, told The Times: “If inflation were to reach 10 per cent, this would mean that UK pensioners would be missing out on £1.7 billion per annum of pension in real terms, equivalent to £400 a year for the typical DB pensioner.

“On the other hand, the cap means UK DB schemes are protected from an additional £30 billion of liabilities.”

But more than five million Brits retired from the public sector will not be impacted as there is no cap on their schemes – meaning their pensions will be raised alongside the inflation rate.

Pensions are either Defined Benefit (DB) pensions, or Defined Contribution (DC) pensions.

A DB pension is where what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year on retiring – but they’re not usually offered by employers anymore.

Instead, you’ll most likely have a DC pension, which is where you are automatically enrolled in your workplace pension scheme when you join.

That means that you save in money each month and what you have to retire on is based on how much you’ve put away and how well your investments have done.

It comes after pensions expert revealed four common mistakes that could see you miss out on THOUSANDS in retirement.

Meanwhile, millions of pensioners have been urged to check whether they could get extra help worth £3,300 a year.

Many retirees don’t realised they’re eligible for extra financial help to boost their pension pot.

But you can get Pension Credit if you’re over State Pension age and on a low income.

This post first appeared on thesun.co.uk