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

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.

5,000 Lloyds current account holders to receive £200 bonus

Lloyds Bank will randomly select 5,000 current account customers to receive a bonus £200 payment to help with...
5,000 Lloyds current account holders to receive £200 bonus

NS&I to delay phasing out of Premium Bonds prize warrants

National Savings and Investments (NS&I) is postponing the phasing out of Premium Bonds prize warrants unti...
NS&I to delay phasing out of Premium Bonds prize warrants

Savings rates carnage: Six alternatives to holding cash

The pandemic has seen many people have more cash to save than normal. But with savings accounts paying paltry...
Savings rates carnage: Six alternatives to holding cash

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.

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.