• Government response to consultation on replacing the Retail Prices Index (RPI) inflation measure with alternative Consumer Prices Index (CPIH) published alongside the Spending Review (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/938008/RPI_Response_FINAL_VERSION_.pdf)
• Chancellor Rishi Sunak says change will not happen until 2030
• However, investors who lose out as a result of an RPI downgrade will not be compensated
Tom Selby, senior analyst at AJ Bell, comments:
“Chancellor Rishi Sunak has pushed the effective abolition of the RPI inflation measure as far back as he can to ensure it is not ‘materially detrimental’ to holders of index-linked gilts.
“However, from 2030 onwards the message is unequivocal: if you are negatively impacted by this, tough. The Government is clear it will not provide any kind of compensation to those who lose out as a result of the downgrade in the value of RPI.
“This looks set to include millions of defined benefit (DB) scheme members whose pensions are linked to RPI. In addition, those who have bought annuities from insurance companies promising annual RPI inflation rises will also bit hit.
“While the average difference between RPI and CPIH might look small at 0.8 percentage points, over time that could lead to a retirement income worth thousands of pounds less.”
