The
Bank of England is putting more cash into the economy, but this is having a
negative effect on pensions. Read how here.
By Lana
Clements
The Bank
of England yesterday
announced it was injecting £50 billion into the economy by increasing the
size of its quantitative easing (QE) programme from £275 billion to £325
billion.
However,
campaign groups have said the decision is "robbing" people of the
retirement they have saved all their life for. The purchase of government bonds
(Gilts) by the government has pushed up prices and lowered interest rates and,
in turn, annuity rates.
Most
people buy an annuity with their pension money upon retirement, which then pays
out an annual income. But if annuity rates are being driven down, people get
less money each year.
An annuity
is bought for the rest of the retiree's life, so a change in rates dramatically
alters the wealth of a person.
Simon
Healy, head of savings at Aldermore, says that the Bank's move "heralds a
fresh blow to pensioners' retirement income".
"When
quantitative easing was introduced in March 2009, it had the knock-on effect of
reducing annuity rates by 6% that year. Now they are likely to fall further
still, as QE once again takes its toll on gilt yields."
Dr Ros Altman, meanwhile, says it is important for
everyone to understand the almost impossible position facing older people
around retirement today.
She says: "Why is the Bank ignoring these terrible
effects on pensioners? Is it because officials don't realise how many people
are being hit and these older people do not have a powerful voice?"
Dr Altman goes on to argue that that "QE is supposed
to be a temporary boost to the economy, but it is making many pensioners
permanently poorer".
