We finally heard the outcome of the RPI methodology consultation at the Spending Review, which confirmed that RPI would be aligned to the typically lower CPIH measure.

The consultation sought views on when the change in methodology should occur: 2025, 2030 or somewhere in between, and what the effect on holders of the relevant gilts would be.

The Chancellor only had the power to approve the change to methodology up to 2030, and it is welcome that the implementation date is as late as it could have been.

But the effects will still be keenly felt by those with RPI-indexed pensions (particularly younger people with those benefits) and holders of the gilts themselves, some of whom will see an equivalent change to their liabilities, and some who will see a material dent to their balance sheets.

RPI is an imperfect measure. But while there had been speculation that the measurement of inflation would change, the continued issuance of RPI index-linked gilts (ILGs) signalled to investors that the government was supportive of its measurement.

This led to investors acting in the assumption that RPI would remain and has helped the UK debt market have the greatest proportion of ILGs in the G7.

Now the market has certainty, organisations can start to plan ahead of the February 2030 implementation date; but for some, there will be little opportunity to mitigate the impact.

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