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Which measure of inflation do we use?

We use the Retail Prices Index (RPI) to calculate changes in the value of Index-linked Savings Certificates. The RPI measures the average change in the prices of goods and services bought by most households in the UK. It is published monthly by the Office for National Statistics (ONS).

The Government now uses the Consumer Prices Index (CPI) for its inflation target although the RPI is still used, for example, for index-linking of pensions. Both the RPI and CPI can go up or down, and the difference between them can change. To check the latest official figures and find out more, visit www.statistics.gov.uk.

What’s the difference between RPI and the annual rate of inflation?

The RPI figure is different from the annual rate of inflation. Annual inflation is measured as a percentage by comparing the value of the index for a particular month with the value for the same month in the previous year. The RPI figure measures the variation month by month. It goes up if prices rise compared to the previous month, and down if prices fall.

Which month’s RPI do we use?

When calculating the index-linking on your Savings Certificates, we start with the RPI figure two months before the date of investment. For example, the figure published on 24 March 2009 relates to data collected during February 2009, so it will be shown on the ONS website as the February figure. This figure will be used as the RPI start figure for any investments made in April. Then on each anniversary of the date of investment, we will use the RPI figure for 12 months after the start figure (or previous anniversary figure) to calculate the index-linking for that year.