Pensions: Up to 260,000 retirees miss out as PPF lifeboat fails to match inflation

The pension pays out a guaranteed income in retirement, which usually rises with inflation.

However, an overlooked part of the PPF's rules means that more than a quarter of a million people don't have protection against soaring prices.

As inflation has remained high for the last two years, Britons on the fund have seen two consecutive hits to their spending power.

Last year, inflation would have caused incomes to surge by 10.1 per cent, and this year's inflation compounds that loss by a further seven per cent.

Some pensioners are missing out on more than £5,100 in pension rises in total this year and next.

The amount the pension increases every April is capped at 2.5 per cent or frozen altogether - which leaves their income short of price rises.

As inflation continues to remain high, Britons face a second year losing thousands of pounds in spending power.

The PPF said increasing the cap for inflation to 2.5 per cent would cost the scheme £4.3billion and a cap of 5 per cent would increase its liabilities by £7.7billion.

A spokesman said: "We have provided the Government with our assessment of linking pre-1997 compensation to inflation."

A total of 60,000 people are receiving no inflation increases at all, meaning their pension income is permanently frozen, according to campaign group the Deprived Pensioners Association (DPA).

The Bank of England does not expect inflation to fall back to its two per cent target until the beginning of 2025.

Ros Altmann, a former Pensions Minister, told the Daily Mail that the rule is a "big disappointment".

She is now urging the PPF to make a one-off cost-of-living payment to those affected to help them through the crisis.

"That would help make it more affordable and palatable," she added.

A PPF spokesman said: "We are very conscious and sensitive to the impact of inflation on our members. The way PPF compensation is increased is set in legislation."