RPI Consultation response

On 25th November (the same day as the Chancellor’s spending report) a response to the recent RPI consultation, to which NTLPA submitted a view, was published. The 60 page report is quite detailed but basically supports the view that the way the RPI is calculated should change, in the way previously proposed by the Office of National Statistics (ONS), which will have the effect of reducing its increase. The reason that ONS dislikes the RPI is that it is now believed that its formula is flawed in a way that overstates inflation.

However there are significant consequences to such a change, including returns on government bonds linked to RPI and, not least, on pensions like ours that are linked to RPI. This could mean a significant loss over the period that a pension is in payment, though it is worth noting that the 3% underpin in our scheme provides protection when inflation is below this level. There are upsides for some groups, as rail fares and student loan repayments are currently linked to RPI.

However, the good news for the losers, at least for the time being, is that the Chancellor has decided that the changes should not come in before 2030 so there should be another nine years before anything changes.

For more information there is an article on the BBC news website here and if you want to read the full report it can be found here.