Bank of England cuts interest rate by 0.25%

Bank of England cuts interest rate by 0.25%

07 Aug 2025

Adam Gillespie, Partner at XPS Group, commented: “While today’s cut offers some relief for mortgage holders, we expect the impact on DB and DC pension schemes to be modest. This cut won’t move the needle much for most schemes as it is the movements in long-term UK yields - shaped in part by the Government’s challenging fiscal position - that will have the greatest impact on pension outcomes. Trustees and sponsors should remain focused on the bigger picture: robust long-term funding and risk management, and not simply the latest rate change.

Today’s cut is likely to have a negligible impact on UK DB schemes, with schemes remaining well-funded and largely insulated from short-term rate changes by hedging strategies. For DC savers, the picture is more nuanced. Lower base rates may reduce returns on cash holdings, but long-term pension growth continues to be driven primarily by investment performance rather than short-term rates. Outcomes for those purchasing annuities continue to depend heavily on long-term yields.”