Mike Ambery, Retirement Savings Director at Standard Life says: “Today’s inflation data brings some welcome news, with CPI falling to 3% in January – its lowest level since March 2025 and a clear step down from December’s rebound. The slowdown reflects lower airfare and petrol prices, alongside a cooling in food price rises after sharp increases at the end of last year. With the Bank of England choosing to hold rates at its most recent meeting, today’s figure – along with yesterday’s labour market data, which highlighted a rise in unemployment alongside a slowdown in wage growth - strengthens the case for a cut in March. This comes particularly against the backdrop of subdued economic growth, with GDP expanding by just 0.1% in the final quarter of last year. However, inflation remains above the 2% target and policymakers are likely to want confidence that the improvement is sustained before moving more quickly. For households, today’s easing inflation will bring some relief after several years of price rises and a worrying upward trend across much of 2025. That said, lower inflation doesn’t mean prices are falling – just that they’re rising more slowly – and one month’s data doesn’t guarantee a lasting downward trend. In the near term, borrowers will likely welcome today’s figure and what it means for the prospect of further rate cuts, while those approaching the end of a fixed-rate deal may wish to review their options carefully in light of the changing rate environment. For longer-term savers and those planning for retirement, the core message remains unchanged. Even as inflation stabilises, ensuring savings can keep pace with the cost of living over time is crucial. Investing, including through tax-efficient options like pensions, can offer a better chance of maintaining purchasing power and building financial resilience. For those already drawing an income in retirement, having a clear and balanced plan that provides dependable income while offering some protection against inflation remains essential, whatever the short-term economic backdrop.”
Adam Gilespie, Partner, XPS Group said: “For defined benefit schemes, the direct immediate impact is limited. Most remain well insulated from inflation movements, with aggregate surpluses of around £220 billion. However, a meaningful fall in inflation alters the future protection offered by LDI strategies. Without recalibration, schemes risk their inflation hedge slipping - leaving them exposed if price pressures resurface. In a lower-return environment, keeping inflation and interest rate risks firmly under control is essential, making today’s data another cue for trustees and sponsors to revisit their hedging strategies. For defined contribution, the focus is shifting from inflation to adequacy. Despite price pressures easing, many savers remain behind the curve. Without higher contributions or stronger long-term returns, the real value of DC pots will keep eroding. Keeping pace now means boosting contributions where possible and ensuring growth assets deliver over time.”
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