TL;DR
UK CPI averaged 4.5% per year from 1970-2024 vs 3.9% for US. The 1970s saw 15-25% UK inflation; the 2022 surge hit 11% briefly. Higher base inflation requires more conservative real-return assumptions.
In short
UK FIRE planners should plan around 2.5-3% expected inflation, not the 2% Bank of England target. The historical record suggests inflation surprises to the upside are more common than to the downside, and the past 5 years have reinforced that.
We're working on a full deep-dive for this article — including historical data, charts, and worked examples. In the meantime, you can run a free simulation to explore the underlying numbers yourself.
Frequently asked questions
- Should I use CPI or RPI for FIRE planning?
- CPI. RPI runs roughly 1% higher and is being phased out. Real-return assumptions should be based on CPI.
- Do inflation-linked gilts work for FIRE?
- Yes for the bond portion. Real-yielding gilts (or TIPS for US investors) provide explicit inflation protection. Real yields are positive again as of 2024-2026 for the first time in years.
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