Article 2DQ6Q CPI was never meant to be real measure of inflation | Letters

CPI was never meant to be real measure of inflation | Letters

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Letters
from Economics | The Guardian on (#2DQ6Q)

Your article (Pension changes could cost 11m Britons thousands of pounds, 21 February) says 75% of pension schemes use the retail price index (RPI). But all the public-sector schemes, which must be more than 25%, as well as many in the private sector - eg BT, BA - have used the consumer price index (CPI) for years. The article says RPI is usually greater than CPI; in fact it is virtually always greater because of the different way they are calculated - it's called the formula effect. To cut a long and complicated story short, RPI may overstate inflation by about 0.2% on average but CPI understates it by about 0.8%.

Over time that's a big difference and will of course affect future pensioners (today's young) more than it will current pensioners - this is not a baby boomer issue. Basically CPI was never meant to be a real measure of inflation; rather it was a way of comparing inflation in EU states. Its adoption by the government as the measure of inflation rises - on benefits as well as pensions - since 2010 is basically a mendacious scam.
David Quinn
London

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