Inflation: the assumption everything rests on

What 2.5% a year does to money over a retirement, what UK prices actually did since 1988 on the ONS index, why every figure in a Hundred Summers plan is in today's money, and how the plan is stress-tested against inflation that does not behave.

One lever among many. Optimising your plan shows every lever, which ones apply to you and how they interact.

Every projection has an inflation assumption, stated or not. Most retirement plans fail quietly through it: an income that felt ample at 65 buys half as much at 90, and nothing dramatic ever happened.

The arithmetic

At 2.5% a year (the Hundred Summers planning default, above the Bank of England's 2% target) money halves in purchasing power every 28 years: £10,000 buys what £6,103 buys today after twenty years, and you would need £16,386 then to match £10,000 now. A 30-year retirement from 60 spans that halving. The inflation calculator shows any amount over any horizon, and the real return on savings: cash at 4% against 2.5% inflation earns 1.46% a year, not 1.5%.

What UK prices actually did

The same calculator carries the ONS consumer prices index since 1988: prices doubled between 1995 and 2025, an average of 2.44% a year, and rose 27% in the five years to 2025 alone, nearly 5% a year, most of it in 2022 and 2023. Averages hide the episodes, and the episodes are what break plans: the 1970s took prices up two and a half times in a decade, and 2022 showed that a decade of 2% is no promise about the next year.

How the plan handles it

Every figure in the Hundred Summers app is shown in today's money, deflated at the plan's inflation rate, so “£30,000 a year at 85” means £30,000 of today's purchasing power and the question is whether the pot can pay the inflated amount. Spending, the State Pension and defined benefit pensions are indexed; the stress battery includes a persistent-inflation shock; and the historical backtest replays every inflation episode since 1928 through your own plan, including the 1966–81 grind that ended more retirements than any crash. The drawdown calculator shows what indexed spending does to a pot, and the Living Standards checker what a lifestyle costs in today's prices.

← Optimising your plan: the overview← All guides