Every month, the Office for National Statistics (ONS) estimates the inflation rate in the UK by calculating the change in price of a representative basket of goods and services.
The ONS uses three ways to measure price inflation:
- Consumer Prices Index (CPI);
- Consumer Prices Index + owner occupiers’ housing costs (CPIH); and
- Retail Prices Index (RPI).
Most members of the Scheme who currently receive a pension will have increases to their pension calculated using RPI. The Scheme also holds investments that have returns based on RPI.
Due to differences in the way RPI and CPIH are calculated, CPIH tends to be about 1% lower than RPI. If RPI was to be effectively replaced with CPIH from 2030 (in accordance with the decision taken by the UK Statistics Authority and the Chancellor of the Exchequer on 25 November 2020), this would mean that lower annual increases would be applied to the relevant Scheme members’ pensions in payment and there would be an impact on the value of certain investments which are held by the Scheme.
In April this year, the Trustee, along with the trustees of four other large pension schemes, announced that they are seeking a judicial review of this decision to ensure the far-reaching implications are fully considered. You can read this announcement and a Q&A providing more details here.
We will post updates here on the website as soon as more information becomes available.