Pension Funds: Government Securities

(asked on 10th November 2020) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment the Government has made of the effect of switching from RPI to CPIH in 2030 on pension funds’ holdings of index-linked government bonds.


Answered by
John Glen Portrait
John Glen
Paymaster General and Minister for the Cabinet Office
This question was answered on 16th November 2020

The Retail Prices Index (RPI) is a measure of inflation with a number of shortcomings. To address these shortcomings, the UK Statistics Authority (UKSA) has made a proposal to reform RPI by bringing the methods and data sources of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) into RPI. Owing to the use of RPI in specific index-linked gilts, prior to 2030 the Chancellor’s consent to this proposal is required before it can be implemented.

At the Budget in March, the government and UKSA launched a consultation to consider whether UKSA’s proposal should be implemented at a date other than 2030, and, if so, when between 2025 and 2030. The consultation closed for responses on 21 August. As part of the consultation, the government invited views on matters including how the holders of the government’s issues of index-linked gilts, all of which use RPI as their reference rate, will be affected by the implementation of reform.

The consultation can be found at the following link: https://www.gov.uk/government/consultations/a-consultation-on-the-reform-to-retail-prices-index-rpi-methodology.

As announced on 9 November, the government and UKSA will respond to the consultation alongside the Spending Review on 25 November.

The 9 November announcement can be found at the following link: https://www.gov.uk/government/publications/a-letter-from-rishi-sunak-to-sir-david-norgrove-on-the-date-of-the-government-and-uk-statistics-authoritys-response-to-their-joint-consultation-on-re.

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