Beyond CPI: Is inflation capturing the cost of your clients’ lifestyles?

The price has not changed. But somehow, you are getting less for your money.

A smaller chocolate bar. Fewer hotel perks. An airline ticket that comes with a growing list of paid extras.

These are examples of shrinkflation and skimpflation. And while they might seem like relatively small changes, they raise an interesting question for financial planning:

In our latest research paper, Beyond CPI: How Shrinkflation and Skimpflation Affect Long-Term Investors, we look at the evidence, how these effects are captured by official inflation measures and what they could mean for long-term planning.

Here are some of the key takeaways.

Shrinkflation is easier to spot

Shrinkflation happens when the quantity of a product falls while its price stays the same. Think fewer items in a pack or a smaller product at the same shelf price.

Skimpflation is slightly different. Instead of receiving less product, the customer receives a lower level of quality or service for the same price.

That could mean slower delivery, fewer staff, reduced customer support or fewer services included in the original price.

And that distinction matters when we think about inflation.

Doesn't CPI already capture this?

In many cases, yes.

If a £2 chocolate bar falls from 200g to 180g, for example, its price per 100g has increased. Official inflation measures can account for that change even though the price displayed on the shelf has stayed the same.

The ONS has also introduced grocery scanner data into CPI and CPIH in 2026, providing significantly more information on prices actually paid, quantities purchased, loyalty prices and promotions.

So our research does not suggest that CPI simply misses shrinkflation.

The bigger challenge is skimpflation, particularly within services.

It is much harder to put a price on a hotel reducing housekeeping, an airline moving something previously included into a paid extra, or a service provider offering less support.

The headline price may not have changed, but maintaining the same experience could cost the customer more.

Your client doesn't buy the CPI basket

This brings us to what we call ‘felt real’.

CPI measures price changes across a representative basket of goods and services. But individual households do not necessarily spend their money in the same way as that average basket.

A client who spends heavily on travel, restaurants, leisure and other services could experience changing costs differently from someone whose spending is concentrated elsewhere.

That does not mean CPI is the wrong starting point for financial planning.

It does mean there can be value in looking beyond the headline number and considering what the individual client actually spends their money on.

Small differences can add up

The impact becomes particularly interesting over longer planning horizons.

In the full paper, we use a simple sensitivity test to demonstrate what could happen if experienced inflation ran only slightly ahead of CPI.

We modelled an illustrative £100,000 investment over 30 years, assuming a 5% nominal annual return and CPI inflation of 3%.

These figures are illustrative sensitivity tests, rather than forecasts or estimates of the actual difference between CPI and experienced inflation.

But they demonstrate why small changes in assumptions can become more significant when compounded over several decades.

So, what does this mean for financial planning?

The answer is not necessarily to increase the inflation assumption for every client.

CPI remains a useful baseline.

Instead, advisers can consider whether the assumptions within an individual client's plan reflect their spending and the lifestyle they want to maintain.

For example, how much of their retirement spending is expected to go towards travel, hospitality and leisure? Which elements of that lifestyle are particularly important to them? And what happens to the plan if maintaining it becomes slightly more expensive than expected?

This is where cashflow modelling can be particularly useful.

In the full research, we use Timeline Planning to compare a retirement plan where spending increases in line with CPI with one where spending becomes slightly higher over time.

With the other assumptions held constant, changing the spending profile affects both plan sustainability and potential legacy outcomes.

The point is not to predict exactly how much more a particular client will spend.

It is to stress-test the plan against a different outcome.

Rather than trying to create a new measure of inflation for every client, these questions can help test how resilient the plan is to the assumptions already being made.

CPI is the starting point, not the whole conversation

There is no need to replace CPI or attempt to predict a client's exact personal inflation rate decades into the future.

But financial planning is ultimately individual.

Understanding how a client spends, what they value and how sensitive their plan is to changes in those costs can provide useful additional context alongside a standard inflation assumption.

So perhaps the question is not “What will inflation be?”

It is: