Chancellor Rishi Sunak has extended the consultation looking at how the retail price index (RPI) should be reformed until summer, to give businesses more time to respond.
In a letter to Sir David Norgrove, chairman of the UK Statistics Authority, published yesterday (April 16), Mr Sunak said he was extending the consultation period by four months in light of the coronavirus crisis.
Originally, the consultation was due to close on April 22 with a government response due before the summer parliamentary recess.
The consultation will now close for responses on August 21, depending on coronavirus-related developments, with a government response due in autumn.
This is to give businesses and pension schemes more time to respond, as they are currently focused on mitigating the challenges Covid-19 has created.
The government is looking to align RPI with the consumer prices index including housing costs.
RPI generally runs at about 1 percentage point higher than CPI and is currently 2.5 per cent, compared to a CPI of 1.7 per cent.
Scrapping the RPI would have consequences for pensions as it would mean that members of defined benefit schemes will receive lower pension increases.
Research from the Pension Policy Institute (PPI) this month (April 1), found a saver aged 65 in 2020 could receive up to 21 per cent less per year from his DB pension by the age of 90 if, and depending on when, the RPI calculation methodology is changed to CPIH.
RPI reform has been the subject of several court cases recently, such as BT’s or Barnardo’s, in which trustees and employers sought approval to change their inflation indexation to reduce benefit payments to members.
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— to www.ftadviser.com