As the Bank of England warns that inflation will exceed four per cent, the retirement plans of many savers are at risk because their regular contributions are fixed at a flat rate.

Fidelity International is urging pension savers to increase their regular contributions by at least the rate of inflation each year so that their retirement savings keep pace with prices.

At four per cent, inflation can have a highly corrosive effect on savings. The real value of £1,000 - its spending power - more than halves to £456 in just 20 years at this level of price rises. The retail price index (RPI), the former government benchmark measure of inflation, is currently 4.3 per cent.

David Dalton-Brown, head of Fidelity International’s direct business, says, ‘Savers have not really had to worry too much about inflation over the past decade. The Bank of England has been very successful at keeping the consumer price index (CPI) close to its target of two per cent. However, rising fuel and food prices are pushing up inflation around the world.’

‘With the CPI in the UK forecast to top four per cent, there is a real danger that many savers’ retirement plans will go off track because they fail to increase their regular contributions. Some savers’ contributions are set as a percentage of their salary, but many more opt for a flat rate at the outset and never adjust the amount to take account of a rise in either prices or earnings.’