The Office for National Statistics (ONS) will keep the way it calculates the retail prices index (RPI) following an extensive consultation process.

But it has recommended an extra inflation index be devised in a bid to meet international standards.

The news was welcomed by the private pensions industry because of its value to investors and retirees alike.

The Treasury also backed the continuing use of the existing RPI formula to work out the returns on new and old index-linked bonds. A change to the current calculation could have saved the government around £2bn in interest charges.

Following the three-month consultation period, national statistician Jil Matheson, said: 'There is significant value to users in maintaining the continuity of the existing RPI's long time series without major change, so that it may continue to be used for long-term indexation and for index-linked gilts and bonds in accordance with user expectations.'

From March 2013, the ONS will publish a new version of the RPI economic indicator, which will also be published monthly, alongside the existing one.

It will use the same formula as CPI for calculating average prices, which will mean that it will typically rise at a slower rate than the original version.

The ONS added: 'While the arithmetic formulation [of the RPI] would not be chosen were ONS constructing a new price index, the National Statistician recommended that the formulae used at the elementary aggregate level in the RPI should remain unchanged.'