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Bank of England Claim Quantitative Easing Not Problem for Pensions

The Bank of England has released a report that claims its strategy of Quantitative Easing, effectively printing money and giving it to banks to lend to businesses, has not negatively affected pensions. However, the Director-General of Saga, Dr Ros Altmann, disagrees with both the argument and the conclusion given by the bank.

The crux of the Bank’s argument is that although interest rates have fallen, which has undeniably harmed pensioners who have large savings rather than investments, the strengthening of the stock and shares markets has helped pension funds, overall cancelling out the effect on pensioners.

However, Dr Altmann believes that “the Bank fails to properly address the impact of QE on a vital demographic group of the UK economy – in particular the 21 million over 50s who have been negatively impacted. Given that QE, even on the Bank’s own estimates, has pushed up inflation significantly, the impact on real incomes and spending power of Britain’s retirees has been damaged. The Bank seems oblivious to this effect.”

Her belief is based on the fact that not only have pensioners lost money due to savings, even if they haven’t lost money from their pension funds (which is of little comfort to those pensioners who relied mostly on savings) but that the rise in the cost of living caused by quantitative easing has seen the real worth of pension funds and interest from savings drop further still.

Another problem that she believes the bank has failed to address is the change in pay-outs of gilts, which many pension funds are invested in heavily. Dr Altmann says the Bank’s actions have encouraged more people to buy gilts, “artificially driving down gilt yields which […] is permanently impoverishing pensioners, is pushing up inflation and damaging consumer spending.”

Whilst she does not argue with the bank about the effects of quantitative easing, she does claim that “all the negative impacts need to be taken more seriously.”

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