With UK inflation holding steady at 3.8%, new analysis from Fidelity International (“Fidelity”) highlights the importance of investing to protect the real value of savings over the long term – and challenges some of the assumptions many Britons hold about which assets truly beat inflation.
Equities remain the most consistent long-term inflation-beater
Fidelity compared the returns of the FTSE All Share index and average UK cash savings rates against inflation between 15 January 1988 and 15 August 20251. The analysis shows that over every 20-year period in this timeframe, UK stocks have consistently beaten inflation, while cash has failed to do so in a quarter of cases.
Looking at rolling 10-year periods, UK stocks outpaced inflation 95% of the time, compared with just 58% for cash. Even over shorter horizons, the trend holds: in rolling five-year periods, UK stocks beat inflation four out of five times (80%), whereas cash savings only managed to keep pace 55% of the time.
This means that savers who left their money in cash for five years would have seen its value fall in real terms almost half the time, while those invested in stocks had a much higher chance of preserving and growing their purchasing power.
Source: Fidelity International analysis of FTSE All Share Index, cash savings returns, and UK inflation (15 January 1988 – 15 August 2025)
Marianna Hunt, Personal Finance Specialist at Fidelity International, comments: “With inflation still elevated at 3.8%, the pressure on household finances is front of mind for many. While cash is important for short-term needs and as a safety buffer, our analysis shows that, over the long term, it has often failed to keep pace with inflation.
“By contrast, equities have provided a far more reliable route to preserving and growing the real value of your money. The longer you remain invested, the greater your chances of beating inflation. Holding too much excess cash risks eroding the value of hard-earned savings, whereas a balanced approach with long-term investments offers a much stronger defence against rising prices.”
Property under pressure: inflation-beating no more?
The stunning growth in UK house prices over recent decades has left many people with the impression that property is the ultimate inflation-beating asset class. However, data from the past 10 years suggests this may be a false impression.
When adjusting for inflation, UK residential property has failed to beat inflation over the past three and five years. Over the past three years, the real value of property has fallen by 9%, while over five years, it fell by 2-3%. Only when extending the time horizon to 10 years does property deliver a positive real return – around 6% after inflation.
Source: Fidelity International, Refinitiv Datastream, data as at 21/10/2025. Returns shown are inflation-adjusted total returns over 3-, 5-, and 10-year periods.
By contrast, global stock markets have comfortably outpaced inflation across all timeframes, delivering +26% over three years, +45% over five years, and +132% over ten years. Gold also performed strongly, returning +49% after inflation over three years and +134% over ten years, though it lagged slightly over five years (+25%).
Global government and corporate bonds, meanwhile, have generally failed to beat inflation over the past decade, delivering negative real returns over three and five years, with only modest improvement over ten.
Marianna Hunt concludes: “Many people assume that owning property is enough to shield them from inflation, but the data tells a different story. Over the past decade, bricks and mortar have struggled to keep up with rising prices.
“For investors who want to protect their spending power, a globally diversified portfolio – with exposure to equities and other long-term assets – remains the most effective way to stay ahead of inflation. The key is not to rely on any one asset, but to stay invested and diversified through the cycle.”
