The September RPI figure was announced this week as 182.5, which is a 2.8% increase (correct to one decimal place as is customary) on the figure 12 months earlier. By virtue of this and in line with Section 590C (5) of the Taxes Act, the Earnings Cap for the next tax year will be £102,000. This is an increase of £3,000, compared with just £1,800 last year.

It remains to be seen whether the Treasury, when officially confirming this figure, will announce any change to the definition of final remuneration in the Practice Notes (wherein proviso (iii) contains a limit of £100,000).

The September RPI figure is always particularly keenly awaited, and not only because of its importance in setting the cap. The basic state pension (BSP) is also RPI-linked. Thus, from 6 April 2004 the maximum BSP will rise by £2.20 to £79.65 for single people and by £3.50 to £127.30 for couples (the convention being to round up to the nearest 5p).

The annual Occupational Pension Schemes (Revaluation) Order is also governed by the September RPI. In turn, the Revaluation Order determines the LPI rate to be applied for the following calendar year (eg to pensions in payment based on post-5.4.97 pensionable service).