Stagflation is returning to the macro narrative, but the implications for UK defined benefit pension schemes are more nuanced than the headlines suggest.

This paper examines two distinct stagflation scenarios. A UK specific energy shock, where inflation and yields rise, can in some cases support funding by reducing the value of liabilities and limiting inflation uplift through caps. A broader global stagflation scenario produces a very different outcome, with weaker growth and falling asset values weighing on funding positions.

Rather than focusing on macro forecasting, the paper considers what trustees can control, including hedging alignment, liquidity preparedness and governance readiness.