RPI & CPI Revisited

on Tuesday, 28 August 2012. Posted in General News

Two years after Mr Osborne’s first budget which resulted in statutory pension increases moving from being linked to RPI to CPI we learn that the Office for National Statistics (ONS) is considering making changes to how both RPI and CPI are calculated.  There are several changes currently being considered by the ONS’s think tank, the Consumer Prices Advisory Committee.
Given all of the upheaval which resulted from the changes in 2010, it is rather bizarre that changes to both the RPI and the CPI are being considered now which are expected to significantly reduce the difference between the two measures of inflation.  It does seem rather obvious that it would have caused much less turmoil if such changes to RPI were implemented first in which case there would have been little benefit to the Treasury in moving from RPI to CPI as a measure for statutory pension increases.
So, if these proposed changes to RPI are implemented it is likely that many private sector pension schemes will revisit the basis on which CETVs are calculated.  If future pension increases are assumed to be lower than previously allowed for then CETVs will reduce to reflect this.  Such changes are unlikely to affect CETVs in the public sector.

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