Headed for a fall

Annuities and deflation


UK consumer price inflation (CPI) woke from its slumber in September last year when it hit 5.2% - over two and half times the 2% average demanded by the Treasury. This was in marked contrast to the previous five years when it was 0.8% off-target at most. But as soon as inflation spiked, the spectre of deflation appeared on the horizon - just as it did in Japan in the early Nineties, following the bursting of the country's asset bubble.

And while CPI - the measure used by the Treasury to benchmar