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Bank of England: QE has not hurt businesses with pension deficits

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Quantitative easing has not put businesses with pension funds deficits under undue pressure, according to the Bank of England’s deputy governor Ben Broadbent.

Answering questions from MPs yesterday, Broadbent defended the Bank’s low interest rate policies which have put downward pressure on returns for company pension schemes.

While Broadbent did admit that loosening credit may have put extra costs on underfunded defined benefit schemes, according to the Financial Times, he said that the Bank had not found “much” evidence that business with pension deficits had suffered in comparison to other busiensses.

Broadbent said: “When it comes to pension funds and QE we think about these things very carefully and we are concerned if it acts as a financial constraint on companies. We monitor after the event and look what it does that to the balance sheets of the pension funds.”

He added: “We can’t see the material effects that would worry us. We are looking for them but they are not there. We can’t find much evidence that the cost of capital has gone up more for companies with pension deficits.”

Falling gilt yields have led to an increase in pension liabilities for many traditional defined benefit schemes. Some companies including UK plastics manufacturer Carclo have recently warned that they may not be able to pay dividends in order to fund pension liabilities instead.

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