RPI methodology changes – ACT response to ONS

The Office for National Statistics (ONS) is proposing changes to the method of calculating the Retail Prices Index which are expected to result in the “new” RPI being typically up to 1 percentage point lower than the “old” index.

This may well represent a fundamental change in methodology and so trigger adjustments in index linked bond issues, pensions and other contracts.

In some cases issuers of indexed bonds will have the obligation or option to repay their bonds which would be disruptive to move issuers and investors. The ACT has submitted a response flagging the significant disruption that could be caused and suggesting measures to mitigate this.

Given that the changes are in the mathematical calculations applied to the data and do not affect the data collection we believe that it would be not be excessively burdensome for the ONS to continue to publish the “old” RPI alongside the “new” RPI.