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Government scraps CPIH inflation measure over reliability concerns

Employers were dealt a blow today as the Government’s alternative measure of inflation was scrapped.

The CPIH measure, which includes housing costs, was introduced last March. It was published by the Office for National Statistics alongside the traditional CPI and RPI measures.

Although CPIH will still be calculated it loses its status as an official national statistic, effectively rendering it redundant. The downgrade comes after concerns emerged about the reliability of the metric.

The UK Statistics Authority, responsible for the ONS, found that inaccuracies in the measure mean CPIH could be 0.2 percentage points higher than currently calculated.

A review will be conducted in the Autumn and the measure could be reinstated at a later date. 

Introduction of CPIH last year paved the way for some pension schemes to alter benefit payments to members. 

Barnett Waddingham actuary Richard Gibson says: “While increases to pensions are normally based on RPI or CPI, some schemes’ rules may give them discretion over the inflation measure to be used. Employers welcomed the new CPIH measure when it came out in 2013 as a cost-saving alternative to the traditional measures. 

“The fact that CPIH appears to have been underestimated risks undermining confidence in national inflation measures. Consistency is key for schemes to assess their funding requirements, and for members to understand their benefits.”

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