Inflation shake-up delayed until 2030 – what it means for pensions, student loans and more

It's been confirmed today that changes to how the retail prices index (RPI) measure of inflation is calculated have been pushed back by five years from 2025 to 2030. The idea is to bring the calculations for RPI into line with the newer consumer prices index including housing costs (CPIH) measure of inflation, which is seen as more representative.

Chancellor Rishi Sunak has actually refused to agree to the calculation change but the UK Statistics Authority (UKSA), which is behind the proposals, can go ahead with the measures without Mr Sunak's consent so long as it waits until February 2030. 

But when these changes do take force they're expected to have far reaching consequences as RPI is currently used to calculate price changes on everything from rail fares to student loan interest rates, while 64% of defined benefit pension providers - also known as final salary schemes - use RPI to calculate annual pension payouts. 

The issue is RPI traditionally tends to be higher than CPIH - the latest data from the Office for National Statistics (ONS), for example, lists CPIH at 0.9% compared to 1.3% for RPI. So this means changes to the calculations could have a negative impact for some, while others are likely to benefit. We round-up the winners and losers below. 

Who is likely to lose out as a result of any change?

Some people who could be negatively affected by any change based on today's existing financial arrangements include:

• Pension savers with defined benefit (DB) schemes. These pension schemes - also known as final salary or gold-plated pensions - are based on your salary and how long you’ve worked for your employer. With these,  you get a lump sum each year in retirement that's usually uprated to account for inflation, and the Pensions Policy Institute (PPI) estimates that 64% of DB pension schemes use RPI to do so. So a lower RPI rate would decrease the value of these pensions.

• Annuity holders. Annuities are insurance products you buy with your pension pot that pay you a cash lump sum each year in retirement. Often these payouts are index-linked meaning they track inflation. So if yours is linked to RPI your payouts rise more slowly.

• Bond investors. If you invest in index-linked gilt bonds, which are government debts, their value can track RPI. This means the amount you earn from investing in them could fall if RPI drops. Investment platform Hargreaves Lansdown adds that the value of these gilts can also drop just on the expectation of RPI changing as investors can see them as less attractive.

Who is likely to win as a result of the change?

Here we round-up who could benefit from any change assuming the current calculations for these products doesn't change:

• Rail users. Annual increases to regulated rail fares, which includes most season tickets, are capped using RPI. So if RPI is less, rail tickets prices may increase by less.

• Student loan borrowers. Plan 1 student loans - those taken out by people who started

   higher education between 1998 and 2011, and Scottish and Northern Irish students starting after 2012 - are charged interest at a rate that

   is the lower of RPI or the Bank of England base rate plus 1%. It's worth noting though that the repayment threshold - the minimum salary at which you start repaying your loan, is also changed each year based on the previous March's RPI, meaning if RPI were to be lower, this threshold could rise more slowly.

  Plan 2 student loans - taken out by students from England or Wales who started uni in or after 2012 - are charged interest at RPI plus up to 3%, depending on your circumstances and income. 

  If RPI dropped, the interest rate charged to both these groups of students could potentially be lower.

• Some mobile phone contract customers. Most of the major mobile providers use RPI to calculate annual price increases, and as these are written into contracts you usually can't escape penalty-free as a result.

   If RPI was lower, then many could see a drop in their price rises.

• Air travellers and car users. At the moment, the uprating of certain taxes, such as Air Passenger Duty and Vehicle Excise Duty (VED), is linked to RPI. So a drop in RPI could lead to air fares and VED rising by less.