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Question for Treasury

UIN 78654, tabled on 22 July 2020

To ask the Chancellor of the Exchequer, what recent assessment his Department has made on the effect of reforming RPI to align with CPIH on pension schemes deficits.

Answered on

7 September 2020

The Retail Prices Index (RPI) is a measure of inflation with a number of shortcomings. To address these shortcomings, the UK Statistics Authority (UKSA) has made a proposal to reform RPI by bringing the methods and data sources of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) into RPI. Owing to the use of RPI in specific index-linked gilts, prior to 2030 the Chancellor’s consent to this proposal is required before it can be implemented.

At the Budget in March, the government and UKSA launched a consultation to consider whether UKSA’s proposal should be implemented at a date other than 2030, and, if so, when between 2025 and 2030. The consultation closed for responses on 21 August. As part of the consultation, the government has invited views on matters including how the holders of the government’s issues of index-linked gilts, all of which use RPI as their reference rate, will be affected by the implementation of reform. As noted in this year’s Debt Management Report, pension funds are a major holder of index-linked gilts. The consultation also contained a section which invited views on the broader impacts of the proposed reform of RPI.

The government and UKSA will respond to the consultation in the autumn.

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