Broadstone believes that the Office of National Statistics decision not to amend the calculation of RPI is bad news for the UK economy, if a good day for pensioners

Broadstone has been disappointed by the ONS’s decision not to amend the formula for RPI.

We expect member groups and Trustees to be relieved that benefits will not be reduced, for those schemes that retained (for whatever reason) RPI as their measure of inflation. However, this must be considered alongside the wider economic impact of the failure to implement a reduction in RPI. This would have reduced liabilities for employers and could have potentially prolonged the life-span of any remaining open DB schemes by reducing the weighty burden on companies to plug deficit funding black holes. It would have helped any company with a legacy DB scheme which diverts money away from the business for the funding the benefits of ex-employees. Instead companies will continue to be forced to prop up these schemes to the detriment of their business plans to encourage growth.

John Broome Saunders, Actuarial Director commented that "Individuals in receipt of a pension should take their share of the burden that pensions have on the economy. The long-term savings that could have assisted UK Plc that a reduction to RPI would have introduced, along with the switch to CPI already implemented would have gone some way to ensuring that companies are better able to invest in their business rather than their pension scheme. This decision is, therefore, bad news for those in work and looking for work in the UK."

John Broome Saunders added that "the decision to create a new measure of inflation, RPIJ, is interesting and it will remain to be seen how this is used in the future and whether it will replace RPI as we know it if it is considered as a more accurate measure of inflation."