No change to inflation calculation

There will be no change to the way the Retail Prices Index (RPI) is calculated, the Office for National Statistics (ONS) has decided. Instead, a new additional index of inflation will be created.

After a three-month consultation, the ONS has decided not to bring the RPI more into line with the slower rising Consumer Prices Index (CPI). The RPI will continue to be used for the uprating of private sector pensions and index-linked bonds.

The National Statistician, Jil Matheson, said: “There is significant value to users in maintaining the continuity of the existing RPI’s long time series without major change, so that it may continue to be used for long-term indexation and for index-linked gilts and bonds.”

Any decision to alter the current RPI index, so that it rose more slowly, would have reduced the future pension increases of millions of private sector pensioners and cut the income of investors in index-linked government bonds and savers with index-linked savings certificates.

However, from March 2013, the ONS will publish a new version of the RPI alongside the existing one; the new index will use the same formula as the CPI for calculating average prices.

www.bbc.co.uk/news/business-20959765

www.ons.gov.uk/ons/guide-method/development-programmes/other-development-work/consumer-prices-advisory-committee/cpac-papers/index.html