New inflation index to be created.

There had be murmurings and rumours that RPI has going to be getting an overhaul, meaning that pensioners and private investments were going to suffer. However the ONS has decided this morning that after the three month consultation, that they would instead create a new separate index to calculate the rate of inflation.

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There was a concern of the consequences of changing RPI as so many influences are reliant on it. The biggest affect would be on pensions and bonds as it would have reduced the value of these. However it was accepted that the current rate was outdated, hence the new index.

From March 2013, a new version if RPI will run alongside the current rate. The biggest difference in the new index, CPIH, is that it will use the same formula as the CPI for measuring average prices meaning that the index will rise more slowly than the current RPI rate. It will also be adjusted to include the costs of buying and owning a home, which has often been seen as a flaw of CPI.

It was a welcome outcome from many including Ros Altmann, director general of financial services at Saga, who said the decision was “brilliant”.

What do you think about the proposed changes? Glad, Disappointed? Let me know…

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About cashflowkiller

Hi! I’m James and am passionate about my small businesses. A strong cashflow is vital for us so I will be curating the latest on cashflow and business news.

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