How does inflation reduce the value of a pension?

When prices rise, each unit of currency buys less. A pension that stays the same buys less every year: real value = pension ÷ (1 + inflation)years.

What does “retains approximately X% of purchasing power” mean?

It is the share of today’s buying power your pension still has after the chosen years, given your annual increase and the inflation rate. 100% means it fully keeps pace; below 100% means it has lost value.

What pension increase do I need to keep pace with inflation?

An annual increase equal to inflation keeps purchasing power constant. The comparison table shows what happens if increases are lower, equal to or higher than inflation.

Which inflation rate is used by default?

Your country’s 2026 national inflation — an IMF projection for one year. Over longer periods inflation can differ, so try several rates.

Is this pension advice?

No. It is an illustration based on the numbers you enter. Pension rules, indexation and taxes differ by country and scheme, so check the details with your pension provider.

Pension Erosion Calculator — Future Purchasing Power

Pension erosion calculator

See how inflation reduces the purchasing power of a pension — and how annual increases change the picture.

Pension purchasing power over time

Chart will appear once the inputs are valid.

Next: find your own personal inflation rate →

How to use this calculator

Enter your current monthly pension and your country.

Set the years ahead you want to look at; add your age if you want the chart labelled by age.

Check the inflation rate, and enter the annual increase your pension receives (0 for a fixed pension).

Read how much purchasing power it keeps, and compare with increases below, equal to and above inflation.

Why fixed pensions lose value

A pension paid as the same number every month buys less each year when prices rise. At 5% inflation a fixed pension keeps only about 61% of its purchasing power after 10 years and about 38% after 20. Annual increases that match inflation protect it; increases below inflation only slow the erosion. You can also check whether your pay has kept pace with the Salary Tracker.

Methodology

The pension in future money is compared with prices that rise at the inflation rate. The ratio is what is left of today’s purchasing power.

Purchasing power (fixed pension)

Real Value = Current pension ÷ (1 + inflation)^years

With annual increases

Real Value = Pension × ((1 + increase) ÷ (1 + inflation))^years

Pension needed to keep your lifestyle

Required = Current pension × (1 + inflation)^years

Worked example

Pension 1,500 a month, 5% inflation, 15 years, no increases: 1,500 ÷ 1.05¹⁵ ≈ 722 in today’s money — about 48% of today’s purchasing power.

To keep today’s lifestyle it would need to reach about 3,118 a month.

Assumptions

Inflation and the pension increase are constant every year.
Amounts are before tax and ignore any other income.
The “below inflation” case uses half of the inflation rate; the “above inflation” case uses the inflation rate plus 1 percentage point.
Currency is a label only; no exchange-rate conversion is applied.

Data source: national inflation comes from the IMF World Economic Outlook (April 2026). The 2026 value is an IMF projection, not a finalized figure. Category inflation (Personal Inflation calculator) is a 2026 estimate: US figures use BLS CPI sub-indices; other countries are informed estimates from IMF sector data, national statistical agencies and World Bank WDI. Everything the calculators output is an estimate built on the assumptions you enter.

Disclaimer: Inflation Compass calculators provide illustrative estimates based on the assumptions and data entered. Actual inflation, investment returns, expenses, pensions, and retirement outcomes can differ.

How much will inflation erode your pension?