Shoosmiths on pensions: is this the end for RPI?
On 19 March 2013, the Office for National Statistics (ONS) published two new price indices (RPIJ and CPIH) and de-designated RPI as a national statistic. The new indices have been released as ‘experimental indices’ until the UK Statistics Authority has completed its assessment in summer 2013. In the meantime, RPI figures will continue to be published by the ONS, and there has been no indication as yet that it will necessarily cease to be published or be replaced by the RPIJ.
As with RPI, the RPIJ is based on a basket of domestic goods - currently around 700 - weighted to reflect their respective shares within household budgets. Based on the conclusion of a consultation carried out by the National Statistician that the ‘Carli’ formula (used to calculate RPI) does not meet international standards, however, the RPIJ replaces this with the ‘Jevons’ formula. The result is that estimates of inflation using RPIJ will be lower than or equal to those using RPI.
Where scheme rules refer directly to the legislation, a change to CPI will already have occurred. For all other schemes, the ability to switch to the lower CPI or RPIJ indices as the basis for relevant calculations will depend upon how the ‘index’ is defined in the scheme’s trust deed and rules…
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