Investment at any end of the spectrum and the effects of all types of inflation

01 April 2019

There are certain factors when considering investment that need to be taken into account, irrespective of whether you prefer high, medium or low risk investment, or just a spread across the investment spectrum. The way tax will apply to any returns needs to be considered, as do the effects of inflation.

The Retail Prices Index (RPI), the Consumer Prices Index (CPI), and CPIH (Consumer Prices Index Household) may be relevant to the purchasing value of your pound, or indeed the way a pension in payment to you increases over the years.

For reference, each index measures different things and these are as follows:



Retail Prices Index (RPI)

RPI measures changes in the cost of an illustrative sample of retail goods and services, including certain housing costs

RPI is no longer a National Statistic

Consumer Prices Index (CPI)

CPI measures changes in the cost of a fixed basket of consumer goods and services purchased. It excludes housing costs

Consumer Prices Index (Household): CPIH

Consumer Prices Index, including owner occupiers' housing costs

In the many client reviews that the team has completed at the start of 2019, we have noted that 2018 ended with significant market falls over the last quarter of the year and there has been much comment on this position. From a global perspective, we have continued to experience market volatility, with the potential slowing of global growth, and rises in interest rates in the US. This is largely reflected in recent fund values and we anticipate this volatility may continue over 2019 and beyond. We continue to maintain our investment 'house view' on our website to reflect the current position.

Inflation rates have been historically low for many years, although we will see for how long this trend continues. Current inflation rates are as follows:

Inflation Rate

Annual Percentage


Retail Prices Index (RPI)


February 2019

Consumer Prices Index (CPI)


February 2019

Consumer Prices Index (Household): CPIH


February 2019

Source: Office for National Statistics (ONS)

With these noted, it is easy to forget the rates of historic inflation we have seen in years/decades gone by. As examples, over the last few decades, we have seen the following:

Inflation Rate

Average Annual Percentage

1970's Retail Prices Index (RPI)


1980's Retail Prices Index (RPI)


1990's Retail Prices Index (RPI)


1990's Consumer Prices Index (CPI)


Source: ONS (historically calculated)

During the times when we have experienced investment volatility, it is important to remember that most asset related investments are made for the longer term and that movements in the market are to be expected, both now and into the future. We have been, and we remain, keen advocates of investment diversification across investment areas and assets to add some reduction in investment risk, whilst providing the potential for future returns. For reference, this is detailed on our website in our Investment Risk Scale document here: attitude-to-investment-risk

It is important to recognise that many answers to financial planning issues are addressed with investment into other asset types, such as deposit funds or National Savings & Investments (NS&I) products. An example might be the establishment of an emergency deposit fund, a fund that allows easy access to say three to six months' income for unforeseen emergencies.

As you would expect, the effects of inflation can erode the real return that you may receive on your investments.

No individual advice is provided during the course of this blog

We hope that this update is helpful and please speak to the team at Chapters Financial for your investment planning needs.

Keith Churchouse FPFS


CFP Chartered FCSI

Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899