The UK Government has launched an enquiry into the use of RPI as a measure of inflation.
It will be specifically asking whether RPI should be dropped as a measure of inflation.
The impact if this is dropped is enormous – a vast gamut of contracts, pensions and securities have escalation clauses linked to RPI.
Any changes could generate big losers and big winners. If RPI, which is based on an arithmetic mean, is replaced by CPI, a geometric mean, inflation in a typical year will be 0.8% lower (although in some years theoretically RPI could be lower than CPI).
While 0.8% may sound small, the impact on Indexed Linked Gilt pricing and yield or pensions could be enormous.
You need to assess your position today so you can make timely decisions.
The inquiry is expected to conclude before Parliament’s summer recess – so don’t delay