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Nearly two-thirds of pensioners with defined contribution schemes could lose more than a fifth of their retirement purchasing power to inflation, advisers have warned.

The stark message comes from Aon Consulting, after CPI inflation reached 2.5 per cent in March and the Bank of England predicted future rises above the government's 2 per cent target.

Helen Dowsey, defined contribution principal for Aon Consulting, warned 60 per cent of pensioners with defined contribution schemes did not see their annuities increase year on year in order to counter inflation.

She said: "For retired members of defined contribution schemes, high inflation rates will have a severe knock-on effect. Indeed, at its current rate individuals already face losing about one-fifth of the purchasing power of their pension over the next five years and potentially even more if inflation rates continue to rise.

"During recent periods of low inflation, and with the prospect of high inflation seemingly remote, this option has appeared most attractive to pensioners. The alternative option of choosing a pension that increases has historically been more expensive and thus less appealing."

Ms Dowsey also called on existing savers to "take measures to defend themselves against such negative implications".

She said: "Individuals should consider investing in asset classes that offer inflation protection to safeguard their pension pot.

"Over long periods of time equities have tended to provide an element of inflation protection and therefore investing in equities, particularly for younger workers, should help. For those approaching retirement, the most appropriate asset class may be index-linked gilts."