You are here: Home - Retirement -

Pension and gilt returns under threat from govt RPI plans

Written by:
Some British pensioners, as well as investors in index-linked gilts, face lower returns if proposals to align the retail prices index (RPI) measure of inflation with the consumer prices index (CPI) are approved.

The Office for National Statistics’ (ONS) Consumer Price Advisory Committee, which has been tasked with considering changes to the RPI, has made three proposals which would move RPI closer to CPI.

The move could save the Treasury £3bn a year in debt interest payments.

But experts said it could also present a problem for bondholders. RPI is used to calculate returns on British index-linked gilts and annual rises in some private pensions.

Jonathan Gibbs, an investment director at Standard Life, told Reuters: “There is a trust issue. Clearly the Chancellor wants to reduce his borrowing costs, but I think there is a genuine danger that if the government is seen as moving the goalposts … the market may charge a higher risk premium on investing in British [gilts].

RPI has typically run between 0.5% and 1% higher than CPI, due largely to different calculation methods.

After consulting with the public, the ONS plans to produce its recommendations in January, with a view to them taking effect in March.

Tag Box




Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Insurance Experts: Are you fully insured? Click here to get a quote.

For a free quote or to speak with an insurance expert call 0800 1218744

The 20+ savings accounts that beat inflation

Inflation unexpectedly remaining flat in June was good news for savers who had been expecting the rate to rise...

Why you shouldn’t buy travel currency in the UK with your credit card

If you’re heading abroad this summer, exchanging money in the UK ahead of your travels is a sensible idea. But...

Online pension dashboard could be scrapped

Plans to introduce an online hub which would allow savers to view all their pension savings, including their s...

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week. Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Parents left babysitting £300m worth of possessions

Empty nesters are left saddled with more than £300m worth of belongings, as they babysit their children's possessions.