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RPI measure of inflation to remain

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Press Association
Press Association
Editor
10 January 2013

The retail prices index (RPI), a key measure of inflation linked to retirement income and a raft of other investments and services, should remain unchanged, the UK's top statistician said today.

While the calculations used behind RPI do not meet international standards, the index should be maintained due to its "significant value" to index-linked bond markets, national statistician Jil Matheson says.

She also recommends the introduction of a new index in March called RPIJ, which would use a different way of calculating the prices of goods. It would be more closely aligned to the UK's benchmark level of inflation, the consumer prices index (CPI).

The announcement comes after a consultation on the issue was prompted by the need to address the gap between the estimates produced by RPI and CPI.  

There had been fears that changes to how RPI is calculated would see the index rise at a slower pace, which would have far-reaching implications as the index is linked to a wide variety of services and investments, from water bills and rail fares to pensions and even national debt.

There were concerns in particular for pensioners, as many annuities are linked to RPI and even a small percentage change could knock thousands of pounds off a typical 20-year retirement income.

Many private pensioners also have their annual increases linked to RPI, while returns for investors with index-linked bonds and savings certificates are also based on RPI.

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