The government has extended the deadline for the consultation on reforming the retail price index, to give businesses dealing with the repercussions of the Covid-19 outbreak more time to respond.

Chancellor Rishi Sunak wrote to the chair of the UK Statistics Authority, Sir David Norgrove, informing him that the consultation would close for responses on 21 August, beyond the 22 April original deadline.

In his letter, Sunak said given businesses and individuals were now focused on mitigating the challenges that this public health and economic emergency has created, a meaningful consultation was not possible under the existing timetable.

The UK Statistics Authority (UKSA) has proposed aligning the RPI with the consumer price index including housing costs, which is expected to lower its annual rate by an average of one percentage point.

RPI typically runs at about one percentage point higher than CPI and is currently at 2.7%, compared with 1.8% for CPI. Compounded over the years, the switch could result in scheme members losing thousands of pounds from their pensions.

Tiffany Tsang, Policy Lead for DB and LGPS, PLSA said: “As we have previously stated, we believe RPI is a flawed measure of inflation, but any plans to phase it out must take into consideration the £60-80 billion impact on pension schemes, which have made RPI-linked investments in the interests of their members, in good faith.”

“Workers’ savings must not be unduly compromised by an administrative change in the measure of inflation that acts, in effect, as a tax on employers, savers and pensioners,” said Tsang.

“Any change should therefore necessarily be offset by fair and appropriate mitigation for schemes. We look forward to working with government to find a pragmatic solution that doesn’t unfairly impact individuals’ pension savings,” she added.

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

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Published: June 1, 2020
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