Every month, the Office for National Statistics (ONS) estimates the inflation rate in the UK by calculating the change in prices of a representative basket of goods and services.
There are currently three recognised ways that the ONS uses to measure price inflation:
These measures have widespread applications in the economy but are also used by many pension schemes to calculate annual inflationary increases to benefits.
At BTPS, members of Section A and B currently have their pension increases calculated with reference to CPI, whilst those in Section C currently have their pension increases calculated with reference to RPI.
Due to differences in the way RPI and CPI/CPIH are calculated, RPI tends to be, on average, about 1% higher each year than both CPI and CPIH.
Earlier this year, the Government and the UK Statistics Authority consulted on their proposal to reform RPI to align it with CPIH, with the change happening sometime between 2025 and 2030.
BTPS responded to this consultation and in recent months we have been actively engaging with the Government to ensure it is aware of the impact these proposals would have on our members and the Scheme overall.
On November 25th, the government announced that this change would happen in 2030.
While there’s no immediate change, for members of Section C this alignment of RPI with CPIH is likely to result in their pension increasing more slowly, resulting over time in a lower overall benefit than they would otherwise have received from 2030.
This change will also impact the value of some of the assets that BTPS owns, but that should not affect the pensions and benefits for our members as BT and the Trustee are committed to repairing the deficit.
This change will not impact members of Section A and B who will continue to have their pension increases calculated with reference to CPI.