Schemes should stop debating whether to use the Retail Prices Index (RPI) or the Consumer Prices Index (CPI) and move to an entirely new measure, the Royal Statistical Society (RSS) has said.
Both indices, as well as the fairly new CPI with housing (CPIH) index, fail in the society's tests on technical adequacy and public confidence, and therefore are not useful measures of inflation.
It said RPI is "liable to overestimate inflation in certain circumstances" while CPI can underestimate and using it could "be perceived as unfair" while index-linked gilts receive RPI returns.
Therefore, the government could, in the future, allow schemes to use the Household Costs Index (HCI), which is still under development by the Office for National Statistics (ONS).
This index would monitor changes in household expenses and could also have subsets for different parts of the population, such as pensioners and working age.
The suggestion was made in the RSS's response to the Department for Work and Pensions' (DWP) green paper on defined benefit reform, which explores allowing schemes to move from RPI to CPI.
"We urge that, if a legislative override for pension schemes locked into RPI is proposed, arrangements for the moment should be temporary allowing a switch to the HCI (or to anything else appropriate) once that becomes feasible," the RSS wrote in its submission.
However, while the HCI continues to be developed, the government "might wish to consider" using a figure slightly under RPI - "RPI minus x", the submission added.
Former RSS vice president Jill Leyland said the measure, which she laid the groundwork for with former Eurostat head of price comparisons John Astin, would be suited for modern society.
"We are lacking an index that did the job RPI used to do: to measure the impact of inflation on households as distinct from the macro-economic needs that CPI was designed for," she said. "What we hope, ultimately, is that this will do the job that RPI was originally for, but without the problems that RPI has - that it overestimates - and is designed for the 21st century."
The ONS is expected to release experimental data on the HCI later this year.
Allowing schemes to convert from RPI to CPI has repeatedly proven a contentious issue, with some arguing doing so would unfairly cut benefit promises. The proposal featured as a key part in the DWP's green paper, which closed to consultation on 14 May.
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