By clicking a retailer link you consent to third-party cookies that track your onward journey. If you make a purchase, Which? Will you be better or worse off after the change? RPI is widely used to calculate interest payments on index-linked bonds and student loans, as well as annual increases on some pensions, rail fares.
However, it has been widely discredited by British statisticians since , on the grounds that it typically overstates inflation. Alongside the Spending Review on 25 November, Chancellor Rishi Sunak confirmed the move to bring the rate in line with the 'Consumer Prices Index with owner occupier's housing costs'- or CPIH for short - which takes into account the cost of housing.
This measure of inflation is typically 0. The move could cost investors and pensioners hundreds of billions of pounds, but leave rail passengers and student loan borrowers better off. Get a firmer grip on your finances with the expert tips in our Money newsletter β it's free weekly. This newsletter delivers free money-related content, along with other information about Which? Group products and services. Unsubscribe whenever you want. Your data will be processed in accordance with our Privacy policy.
Inflation gives us an idea of how much prices have changed over a month period and is used to determine how things like benefits and bills need to change to keep up. All measure inflation by looking at the changing prices of around everyday goods and services, but they include different items, cover different parts of the population and are calculated in different ways. For example, RPI measures the changing prices of a basket of goods and services, including mortgages and interest payments.
The problem with RPI was brought into focus in , when the range of clothing in the basket of goods used to calculate RPI was expanded to make it more comparable through the seasons. As a result, there was a spike in clothes price inflation that the Office for National Statistics ONS has called 'implausible'. It comes down to how RPI averages things out, which tends to exaggerate rises, investment and pensions provider Hargreaves Lansdown explains.
