Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, said: “Today’s decision by the Bank of England to hold interest rates at 4% comes as the Chancellor faces heightened scrutiny ahead of the Autumn Budget. While some had expected the Bank to cut rates to stimulate economic growth, this decision to pause reflects its ongoing caution as inflation remains sticky at 3.8%, well above the 2% target. The move highlights the delicate balancing act policymakers face - maintaining support for the economy without reigniting price pressures. For borrowers, the decision means the status quo continues for now. Those on variable-rate mortgages or coming to the end of fixed deals won’t see immediate relief, but stability in rates may help lenders regain confidence and improve competition over time. Borrowers should continue to review their options closely, especially if future rate cuts remain on the horizon. For savers, a hold will come as welcome news after months of speculation about rate reductions. It means savings rates are likely to remain steady for a little longer, giving people more time to benefit from higher returns on cash. However, with inflation still above target, real returns remain under pressure - so it’s worth considering long-term investments that offer the potential to outpace inflation. Pensions continue to be one of the most tax-efficient and resilient ways to build long-term financial security, even in a period of economic uncertainty.”
George Brown, Senior Economist, Schroders said: "Holding rates today was the right decision, with inflation still nearly double the 2% target. The Bank will be in a stronger position after the dust settles from the Budget, armed with additional jobs and inflation data, to judge whether further easing is warranted in December. "A cautious approach remains appropriate given the risk that high inflation becomes entrenched, due to sticky wage growth and subdued productivity. However, this may change if reports the Chancellor intends to double her fiscal headroom to £20 billion, through fiscal tightening in the region of £40 billion, are true. Alongside mooted tax cuts on household energy bills, if these measures materialise, they could create scope for the Bank to cut multiple times next year."
Simeon Willis, Chief Investment Officer, XPS Group said: “The MPC’s decision is in line with expectations earlier in the week and therefore the impact on pension schemes is negligible. Longer term interest rates, which are what matters most to pension schemes, have demonstrated dislocation from short term rates, trading at much higher yields for the last 6 months. Even in light of the recent falls in yields over October reflecting in part more favourable inflation figures, longer term yields are still higher than might reasonably be considered best expectations of future short term interest rates. This reflects the DMO’s challenge of issuing gilts in the current environment. Pension scheme appetite is largely satiated with existing gilt holdings and there is additional supply in the form of ongoing quantitative tightening on top of regular issuance to finance the cash-strapped government. Pension scheme funding remains very favourable given the relatively high yields we continue to witness at longer maturities.”
Nick Flynn, Retirement Income Director at Canada Life UK said: “Just a few weeks ago, a pre-Budget base rate reduction by the Bank of England seemed unlikely. However, weaker-than-expected economic data in October, combined with expectations of a future downward trajectory for inflation, made it a real possibility. Ultimately, the Monetary Policy Committee (MPC) decided to hold the base rate steady. However, the 5-4 vote among MPC members suggests a change could be on the near-term horizon. Attention will now turn to the final MPC meeting of the year, which will help set the tone for market expectations in early 2026. Those considering an annuity can still take advantage of the current competitive rate environment. With the certainty of a guaranteed income for life, annuities continue to be an attractive option for retirees looking to secure their financial future and support their loved ones, especially as the outlook for pensions and tax rules continues to evolve.”
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