NS&I Index Linked RPI vs CPI

6022tivo

Good evening. 
I have 5 ish fully stacked up Index Linked Certs. Some 3yr and some 5yr. 
As they are starting to renew again over the next few years I see they are changing from RPI to CPI. 
Are there any historical charts so I can see the impact?
Also, with the dreaded Covid19, what do you think the impact maybe on CPI / RPI?

Thanks in advance. 

eskbanker

https://www.ons.gov.uk/economy/inflationandpriceindices has all the historical data about these indices, in chart or tabular form....

6022tivo

Interesting that, thanks. CPI is about 30% less than RPI over time which is a shame. 
CPI did well 2008/09 when the world was in struggles. Will be interesting after the government spend billions propping up jobs in the next few months and maybe the next couple of years. 

Albermarle

Also, with the dreaded Covid19, what do you think the impact maybe on CPI / RPI?

With demand depressed and oil prices on the floor, I can not see inflation increasing for some time yet.

EdGasketTheSecond

With unlimited QE, inflation is highly likely. It will start with food prices and spread to all other essentials. You can't just generate currency and have the country not producing any goods or services without there being inflation eventually.

I doubt the CPI lie will properly account for it either. It's a dodgy measurement adopted by gov't to make things appear OK when everyone with any sense can see that when bills come, they have gone up by far more than CPI.

Yes shame about the change with index-linked bonds; I got mine renewed on RPI for 5 years just in time.

bowlhead99

EdGasketTheSecond said:

I doubt the CPI lie will properly account for it either. It's a dodgy measurement adopted by gov't to make things appear OK when everyone with any sense can see that when bills come, they have gone up by far more than CPI.

In some sense, CPI is basically RPI without the bad maths, but it also excludes the owner-occupied housing costs that you get in RPI, so CPIH would have been a better measure, as it attempts to capture some proxy version of the property costs for those who own rather than just rent (but still using rental prices indexes to help do that).  There's an assumption that it will produce a lower result over time (partially due to the 'bad maths' issue being resolved, which is something that was already addressed by the time other countries were putting together their consumer inflation measurements with the benefits of having seen how ours worked, or didn't). Still, if property cost inflation is low or some other type of goods and services inflation is high, CPI might be higher than CPIH and RPI.

All governments get accused of publishing favourable statistics and manipulating targets, but the weighting of the various contents of the 'basket of goods and services' is of course public knowledge. Although you think that "everyone with any sense can see that when bills come, they have gone up by far more than CPI", perhaps that's because you assume that 'everyone with any sense' buys the same stuff as you, which is clearly not going to be the case when looking demographically or across regions of the UK. 

eskbanker

On the subject of bills versus CPI, MSE spent a couple of years attempting to measure an alternative basket of household bills on the basis that they were more representative than the ones underpinning the official index, but that quietly fell by the wayside....

https://www.moneysavingexpert.com/pressoffice/2018/11/household-bills-rising-faster-than-inflation/

bowlhead99

eskbanker said:

an alternative basket of household bills on the basis that they were more representative than the ones underpinning the official index, but that quietly fell by the wayside....

Yes, quite. I'm generally cynical about those sort of things. They are usually an excuse for the producer of the research to throw in a conclusion such as "Yet don’t get too down in the dumps as there’s plenty you can do to ease the pain of rising costs by switching from standard deals to cheaper alternatives". Oh and did you know we were bought for tens of millions by a price comparison website and operate quite profitably by earning money from affiliate links?

The idea that we should measure inflation of things that people reeeeallly spend their money on, rather than things they rarely need to buy which are included in government statistics ('like rugs and door handles') somewhat misses the point that people do spend a certain fraction of their money on doorhandles and rugs or carpeting etc. It is not a large fraction, which is why rugs and doorhandles would only be a tiny fraction of the CPI / RPI index weighting, and it may be a pound you can save by 'making do', but it is still a real cost that you will pay from time to time (or have the cost of it included in your rent etc).

Perhaps the issue for MoneySavingExperts looking at a measure of average costs, or changes in those averages, is really that they are already money smart and generally aim to get the best deals - e.g. the cheapest energy and broadband tariffs etc that they can be bothered to find, not the average deals. 

So if there are five suppliers and on average a consumer spends his money on the mean average of their five prices, or the majority of the consumers use the fourth-cheapest supplier because it has the largest customer base - the moneysaving expert does not actually care about the change in that mean average or mode or median average. He cares about what is the change in the cheapest price last year to the cheapest price now. That could be quite a different result, because if the competitive environment changes, the cheapest gas quote or car insurance (that the forum user could be bothered to switch to) might have gone up 10% compared to last year, even though on average the price paid by a UK consumer for an energy tariff or car insurance only went up 5% and the Index Linked Savings Certificate only paid out 5%.

Joe9090

I would rather have RPI instead of CPI but these are still a very good investment.
I am lucky to have an indexed linked work pension but the maximum yearly increase is 5%.
Inflation has not been any higher than 5% since I retired but but I am not so sure this will last and there are no guaranteed investments anything like these on the market at the moment although they are now closed to new investors.