CPI falls to 2.5%, RPI falls to 2.9%

Fella

Introducing a measure that dramatically reduced official RPI would also be an extremely stealthy way of effectively introducing a retrospective change to the terms of NSANDI Index-Linked bonds. Those are linked to RPI. They still would be but it'd be a different RPI & not the one that made the bonds attractive in the first place. Another kick in the guts for savers.

Generali

Fella wrote: »

Introducing a measure that dramatically reduced official RPI would also be an extremely stealthy way of effectively introducing a retrospective change to the terms of NSANDI Index-Linked bonds. Those are linked to RPI. They still would be but it'd be a different RPI & not the one that made the bonds attractive in the first place. Another kick in the guts for savers.

I'm not sure why removing a free ride is a kick in the guts for savers.

Gracchus_Babeuf

Changing RPI is madness. It ain't broke, don't fix it. They have already introduced CPI, so why change RPI? What is the reason behind this?

".....the US model works in a very dubious way, the gist being they treat equal spend as meaning no inflation. To give an example, if a family spends $x on steak then steak goes up so instead they spend the same amount on mincemeat, it's treated as if there was no inflation because their spend has not increased (even though obviously there was because they're getting less for their money). "

Is this not how CPI works? If you normally buy tinned sardines at Harrods food hall and they go up 20% in price it's treated as a zero rise because you can still get Tesco's value sardines for the same price?

chewmylegoff

Gracchus_Babeuf wrote: »

Changing RPI is madness. It ain't broke, don't fix it. They have already introduced CPI, so why change RPI? What is the reason behind this?

they aren't actually saying that it should be changed. the ONS is drawing attention to the differences between RPI and CPI and saying that they could either leave RPI as it is, or change it so it is more like CPI, and asking for views.

personally i don't see a consipiracy theory here, as if the govt wants to use CPI as a reference point for something (e.g. benefits, pensions) then it already can do so, just by switching its policy. i hardly think that they would bother to change the RPI calculation methodology just to stiff a few people with NS&I certificates (alright and index-linked gilts as well)...

Gracchus_Babeuf

chewmylegoff wrote: »

they aren't actually saying that it should be changed. the ONS is drawing attention to the differences between RPI and CPI and saying that they could either leave RPI as it is, or change it so it is more like CPI, and asking for views.

personally i don't see a consipiracy theory here, as if the govt wants to use CPI as a reference point for something (e.g. benefits, pensions) then it already can do so, just by switching its policy. i hardly think that they would bother to change the RPI calculation methodology just to stiff a few people with NS&I certificates (alright and index-linked gilts as well)...

Well I would be mightily pis**ed off by any messing around with RPI. I have a small frozen final salary pension that goes up by RPI to max 5% each year and I certainly don't want that changed. What's the point of making RPI 'like CPI'? I can understand taking out mortgage payments and using RPIX instead, but in that case why not just use RPIX as a single inflation measure and jettison CPI?

The whole thing stinks. The government will do everything it can to bash the poor, who rely on indexed benefits, and help the rich.

StevieJ

chewmylegoff wrote: »

they aren't actually saying that it should be changed. the ONS is drawing attention to the differences between RPI and CPI and saying that they could either leave RPI as it is, or change it so it is more like CPI, and asking for views.

personally i don't see a consipiracy theory here, as if the govt wants to use CPI as a reference point for something (e.g. benefits, pensions) then it already can do so, just by switching its policy. i hardly think that they would bother to change the RPI calculation methodology just to stiff a few people with NS&I certificates (alright and index-linked gilts as well)...

What about stiffing some people with index linked personal pensions? Anyway it is not just NS&I they also issue debt called linkers that are gilts that are linked to inflation, now that would be a whole lot bigger fish to gut.

Fella

Generali wrote: »

I'm not sure why removing a free ride is a kick in the guts for savers.

Why would you call Index-linked bonds a free ride, they're an investment the same as any other & at times have performed horribly compared to many other investment classes?

Moving the goalposts by changing the nature of what the bonds are linked to is very much a kick in the guts for anyone who invested in good faith.

I'm surprised you'd think otherwise, I had you pegged as one of the sensible guys here.

Generali

Fella wrote: »

Why would you call Index-linked bonds a free ride, they're an investment the same as any other & at times have performed horribly compared to many other investment classes?

Moving the goalposts by changing the nature of what the bonds are linked to is very much a kick in the guts for anyone who invested in good faith.

I'm surprised you'd think otherwise, I had you pegged as one of the sensible guys here.

Fair point but the bonds are meant to be linked to changes to the cost of living. If that has been overstated then savers have been getting overstated returns.

How many people looked at the index calculation and said to themselves, "Hmm, the use of the Carli formula to measure the change in the price of clothes over time makes this investment an excellent choice for me?". How many on the other hand have read that they'll be getting slightly lower returns and are annoyed about it.

I doubt the ratio between two the groups is even 1:99.

The overstatement of RPI amounts to a free ride: it could be worse as at least the Government isn't (yet) proposing to reverse the free ride part of the returns!

Graham_Devon

Generali wrote: »

How many people looked at the index calculation and said to themselves, "Hmm, the use of the Carli formula to measure the change in the price of clothes over time makes this investment an excellent choice for me?".

None. I expect.

They will have looked at the link to RPI, and said "hmmm, that sounds like a good investment to me"

You could turn around and suggest anything is a free ride should the anyone change anything for the worse?

Generali

Graham_Devon wrote: »

None. I expect.

They will have looked at the link to RPI, and said "hmmm, that sounds like a good investment to me"

You could turn around and suggest anything is a free ride should the anyone change anything for the worse?

They're still going to get RPI+. I really don't understand why making the RPI measurement more accurate is a bad thing.

It certainly explains why benefits seem to have gotten more generous over time. I thought, and wrote here, that the price of things people on benefits were more likely to buy must have gone up by less than inflation as a whole. It turns out that index linked benefits have been going up by more than inflation!