PPRuNe Forums - View Single Post - AFPS change from RPI to CPI
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Old 7th Feb 2011, 22:09
  #16 (permalink)  
Greenielynxpilot
 
Join Date: Mar 2005
Location: UK
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I hate to be a pedant but ... No one is losing anything.

People are maybe, at worst, going to be getting a lower increase in some years than they might have been anticipating, had they done their financial planning based on recent RPI figures.

But ... the historical differentials between RPI and CPI you are basing your analysis on should not be taken as a guarantee that future rates for either index will always have the same spread.

And ... selecting a different index is no different to changing the items in that basket of goods that make up that index, or changing the relative weighting within that basket. Both have occured quite frequently in the past, by governments of all persuasions, and neither change has ever attracted much comment at all. An individual's actual exposure to inflation is unique to their spending patterns; an index is just a benchmark to inform macro-economic policy.

Finally .... if you are going to compound an arbitrary differential between two indexes over a large number of years in order to generate your rather alarmist totals, you should at least discount that figure back into a present value (which would partially unwind the mathematical effect of this compounding over a large number of iterations to a somewhat smaller number). Whilst this would not exactly help your argument, it would be a little more accurate, and therefore more credible.

In the meantime, though - in this present financial climate people are already feeling wounded and vulnerable. Many do not fully understand monetary or fiscal policy - so don't scare them with your depressing, alarmist hype.

To put it another way - your premise is that in 2056, a then 85 year old ex-Royal Marine will be worse off to the tune of £212k if he retired this year as a Sgt. If that is the case, lets go down to the RBL and find a bunch of Royals who retired in 1966 and ask how many if them actually have this marvellous £212k nest egg that they all got, but we are going to 'lose'. I'll bet you won't find many.
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