We study inflation hedging from the perspective of a pension fund. Retired participants in the fund have a demand for inflation protection but face a thin market for
inflation-linked bonds. Young participants in the fund have their human capital as a natural inflation hedge. The young may be willing to offer some protection to the old, and thus contribute to complete the market, depending on the price at which the inflation risk is internally traded. Our analysis shows conditions such that a mutually beneficial internal trade exists. The price of the internal transfer will, however, generally deviate from the market price of the inflation-linked bond. Using data calibrated to a long history of inflation, interest rates and stock returns, we find that the internal real interest rate is likely to deviate from the market real interest rate.