It’s been 13 years since the retail prices index (RPI) lost its status as the official measure of inflation. Yet five prime ministers and seven chancellors later, this outdated measure is still being use — and generally when it works in favour of the government. And while some have hugely benefited from RPI calculations, others are on their knees financially.

The phase-out of RPI in favour of the consumer prices index measure began with welfare payments and public sector pensions in 2011, by which point it had become obvious that RPI tends to overstate inflation. I won’t bore you with the finer details but, thanks to the type of average it uses, RPI is typically about one percentage point higher than CPI. Both indexes show how the price of a basket of goods and services has changed over a year but statisticians say that CPI is the more accurate measure.

The plan is for RPI to be completely phased out by 2030 and replaced with CPIH (CPI including homeowners’ costs), an even more accurate calculation. So far, so good. But there will be collateral damage — and some clear winners.

The use of RPI has served the baby boomers, most of whom hit state pension age within the past 15 years, very well. Many highly prized defined benefit (DB) pensions, which pay an income for life, have historically risen in line with RPI each year — and some still do.

It means that pensioners have benefited from the higher measure for decades, with a huge compounding effect, despite repeated warnings about its flaws. And while public sector DB schemes switched to CPIH in 2011, many of the remaining private sector schemes are still using RPI.

So most people with a private DB pension who retired in the past 15 years would have enjoyed pension payments that went up more than the true rate of inflation. And while many schemes have a cap on increases of 2.5 to 5 per cent, this would still have been higher than CPIH was in roughly half of the years since 2011.

But while boomers have benefited, the use of RPI has helped to ruin younger generations’ finances.

Graduates have been among those to take the biggest hit. Thousands of pounds have been added to their student loans because they are still linked to RPI.

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Worst hit are those with a Plan 2 student loan taken out between 2012 and 2023. They have to pay the RPI rate plus three percentage points on top while they are studying. Once they have graduated they could pay just as much, if they are a higher earner. This is far more than someone on Plan 1 who started their course before 2012, who would pay RPI or the Bank of England base rate plus one percentage point, whichever is lower. Those who started later just pay the RPI rate.

In 2024-25 £15.2 billion of interest was added to student loans while £5 billion was repaid. And those who are between 21 and 32 — Gen Z and younger millennials — are having to shoulder most of the cost. This is a group that already has to contend with higher rents, inflated house prices and a shrinking graduate jobs market.

The argument for still using RPI is that it is not that easy to phase out everywhere. Index-linked government bonds, which may not mature for decades, for example, are typically uprated using RPI. But public sector pensions and the whole welfare system successfully switched to CPI in 2011, so why not student loans?

It seems like the government is choosing to cherry-pick which index to use depending on whether it is receiving or paying money. And while boomers have been subsidised by RPI, it’s simply become yet another hidden tax on younger generations.