Pensioners' relief as RPI remains unchanged

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The method used to calculate the retail prices index (RPI) will remain unchanged, the Office for National Statistics (ONS) has said.

The announcement should quell pensioner fears of losing as much as £10,000 over the course of their retirement had the existing RPI formula been changed.

This is because private pensions are linked to RPI and the modifications to the way it is calculated that were being considered would have resulted in the index moving more slowly, in line with the consumer prices index (CPI).

Any such move would have also cut the income of investors with index-linked government bonds and savers with index-linked saving certificates.

However, after a three-month consultation, the ONS has decided to leave the RPI unchanged.

Missed opportunity

Philip Bray, a retirement and pensions specialist for Investment Sense, said: "It is widely recognised that pensioners suffer inflation at higher rates than either of the CPI or RPI figures. In many respects, today was a missed opportunity to introduce a measure of inflation specific to older people.

"Some good news for pensioners to start the day with, but the chances of it continuing with an interest rate rise to help increase savings rates? No chance."

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The public sector pensioners, however, will still suffer the loss as their pensioners are already linked to CPI instead of RPI.