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King claims pensions have not been hit hard by QE

Bank of England governor Mervyn King says claims that quantitative easing has caused significant damage to pension funds are exaggerated.

According to the Telegraph, King told the House of Lords yesterday that the fall in the value of pension funds is not down to the Bank’s £325bn QE programme.

He said: “I am concerned about what has happened to the pensions industry and defined benefit pensions but I think they reflect a wider set of issues. The decline cannot be laid at the door of our programme.

“It might not have had quite such as big an effect as some people think.”

In February, the National Association of Pension Funds warned that QE will push up pension fund deficits, causing more employers to close defined benefit schemes.

NAPF chief executive Joanne Segars said the monetary policy committee’s decision to pump an extra £50bn into the QE programme in February increased pension fund deficits by £45bn.

She said: “This short-term stimulus is leaving pensioners and pension funds in long-term pain. Our fear is that firms struggling with a weak economy will simply choose to close their pension schemes.


“We think the last hit of QE increased pension fund deficits by around £45bn, and the latest tranche will only add to that bill.”

King refused to rule out an increase to the QE programme.

Minutes from the MPC’s March meeting show the nine members were split 7-2 over whether to increase the size of the programme, with David Miles and Adam Posen voting to increase it by £25bn to £350bn.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I disagree that it has a negligible effect on annuity rates. It has had an effect.

    He does not really need to worry for himself on such matters.

  2. I often wonder what world our regulators and Government Ministers live in. When NAPF Chief Exec states the QE has caused great damage to pension funds and annuity rates are at there lowest ever caused b QE those in power ignore the professionals I wonder if it is because they dont have to worry about pensions because theirs are gold plated

  3. No fool like an old fool!

  4. The BoE have been robbing the taxpayer blind with their gold-plated £2.5 billion pension fund -equivalent to a 60% employer pension contribution – that they do not pay into themselves. Please sign the petition to return this back to the taxpayer – http://epetitions.direct.gov.uk/petitions/32357

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