The Bank of England has raised its base interest rate to 0.75 per cent, its highest level since February 2009.
The Monetary Policy Committee justified the 0.25 percentage point increase as an appropriate response to the level of consumer price index inflation, which was above the BoE's target at 2.4 per cent in June.
The committee also voted unanimously not to begin unwinding quantitative easing, and will maintain the stock of corporate bond and government bond purchases at £10bn and £435bn respectively.
According to MPC forecasts, UK GDP is expected to grow by around 1.75 per cent a year on average.
The committee also recognised the potential for Brexit to significantly impact its forecasts.
Rising interest rates are likely to make borrowing such as mortgages more difficult, and as such would leave less income for pension saving.
But Sir Steve Webb, director of policy at Royal London, said this would be offset by other factors: "The improving prospects for wage growth increases the chance that the April 2019 increase in contribution rates will again be comfortably absorbed by employees."
As for defined benefit deficits, Webb said the rate rise was "likely to reinforce" the trend of rising discount rates, combined with slowing longevity improvements.
However, Jignesh Sheth, director and head of strategy at JLT Employee Benefits, said the rate rise alone was unlikely to impact deficits.
"We do not expect today’s increase to have a significant impact on longer term rates," he said.
"However, this rate rise will help to support the value of sterling, which has been under pressure in the light of increased Brexit uncertainty," he said, arguing that rises in the FTSE 100, which have overseas earnings and have benefited from the drop in the pound, may therefore be tempered.
