Partner Jane Kola comments in Pensions Expert on how the government can best approach possible reforms of the retail price index
The chair of Airways Pension Scheme Trustee Ltd, Roger Maynard, has warned that possible reforms of the retail price index (RPI) could cause great injustices, as well as undermining trust in the issuance of index-linked gilts.
RPI has typically run around 1 percentage point higher than CPI and its variants over the years. While restating RPI liabilities as CPI could be beneficial for DB schemes, the corresponding drop in the value of RPI hedging assets means that some could be exposed to funding level drops.
Meanwhile, experts have said that the government appears to have shown little thought for how to compensate investors in assets linked to varying inflation standards.
Jane Kola commented:
“The government should stop the index arbitrage in government affairs by using RPI on things like student debt and rail fares but CPI on pensions and benefit payments.”
Read Jane’s comments in Pensions Expert.
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