The rise in inflation to 3 per cent in January 2025, up from 2.5 per cent in December 2024, could have significant implications for pensions, particularly state pension increases under the triple lock.

The Office for National Statistics has revealed that on a monthly basis, the consumer price index (CPI) fell by 0.1 per cent in January.

Core CPI, which excludes energy, food, alcohol, and tobacco, increased to 3.7 per cent, from 3.2 per cent in December.

Barnett Waddingham chief investment officer, Matt Tickle, said the fact that the CPI inflation figure was above market expectations of 2.8 per cent showed that, although progress has been made since the October 2022 peak, inflation remains a “significant” challenge for the Bank of England. 

“We believe the impact of this recent uptick in inflation is likely to be muted for investors,” he stated.

"Defined benefit (DB) pension schemes continue to be well hedged against this risk and for other investors we expect this increase to be temporary and expect disinflationary conditions to return into 2026 in the UK."

However, AJ Bell head of investment analysis, Laith Khalaf, said that inflation is 1 per cent away from the target and “heading in the wrong direction”, and consumers better “buckle up” for prices to trend higher throughout this year.

“The Bank of England reckons inflation will hit 3.7 per cent in the third quarter, and that’s without a potential tariff shock stemming from US trade policy,” Khalaf said.

“The chancellor’s decision to raise national insurance and the national living wage from April will no doubt feed into the inflationary dynamic.”

NerdWallet UK personal finance expert, Amy Knight, said that the slowdown in pay growth could mean September’s CPI figure could be the metric used to uprate the state pension from 2026.

“Under triple lock rules, the state pension will increase according to whichever figure is highest out of average earnings growth, inflation, or 2.5 per cent,” Knight continued.

“Relative to average earnings, pensioners today are better off than they have been since the 1980s, but that doesn’t mean the state pension is sufficient for a comfortable standard of living.”

She said that supplementing state pension with personal or workplace pensions is important to give savers greater financial security and help them achieve the retirement they want.

However, she said that sole traders and contractors, who don’t have access to auto-enrolment schemes, need to take the initiative to set up their own pensions when self-employed.

Meanwhile, Standard Life managing director for retail direct, Dean Butler, commented: “For those comfortable with taking on more risk, investing can provide the potential for higher long-term returns, though it comes with no guarantees.

“Pensions offer the combined benefits of possible investment growth, employer contributions, and tax efficiency - making them a compelling option for long-term savers.”

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