By Marcus Leach
The Office for National Statistics (ONS) have declared that there will be no change to the way the retail prices index (RPI) is calculated.
This announcement comes following a three month consultation, at the end of which the ONS decided not to bring the RPI more into line with the slower rising consumer prices index (CPI). Instead, a new additional index of inflation will be created.
"There is significant value to users in maintaining the continuity of the existing RPI's long time series without major change, so that it may continue to be used for long-term indexation and for index-linked gilts and bonds," National Statistician, Jil Matheson, said.
The RPI will continue to be used for the uprating of private sector pensions and index-linked bonds. The ONS decision means that from March 2013, it will publish a new version of the RPI alongside the existing one.
The main difference will be that the new index will use the same formula as the CPI for calculating average prices. That will mean the new RPI measure will usually rise more slowly than the long established version.
The Treasury confirmed it would continue using the RPI measure for calculating the return on both old and new index-linked bonds.
"For gilt investors, future cash flows on existing index-linked gilts will continue to be calculated by reference to RPI," said the Economic Secretary, Sajid Javid.
"The government will continue to issue new index-linked gilts linked to the RPI."
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