The National Association of Pension Funds has called for an emergency meeting with The Pensions Regulator after the Bank of England announced plans for further quantitative easing.
Earlier today, the Bank’s Monetary Policy Committee revealed plans to increase its programme of quantitative easing by £75bn to £275bn.
The move is expected to harm UK pension schemes as gilts are likely to become more expensive, depressing interest rates and reducing the return on pension fund investments.
NAPF chief executive Joanne Segars (pictured) says: “It is crucial that The Pensions Regulator takes into account the negative impact of quantitative easing on pension schemes.
“Lower interest rates will increase pension deficits, making them look artificially large. This is even more worrying as the Bank of England is intending to extend its gilt purchases into longer term maturities, which will have a larger impact on pension fund deficits.
“We are writing to The Pensions Regulator to request an urgent meeting to discuss the implications of quantitative easing on pension funds and what can be done to protect them.”
An NAPF spokesman says the lobbying organisation will urge the regulator to take a “more pragmatic approach” when approving defined-benefit pension scheme recovery plans.
Hargreaves Lansdown head of pensions research Tom McPhail says: “The QE announcement has produced a modest spike in gilt prices which will fuel expectations of further annuity rate cuts in the future.
“Investors should not delay buying an annuity in the hope of a short-term bounce in rates. It may happen, but there is no strong reason to expect it.”
A spokesman for The Pensions Regulator says: “We understand that quantitative easing is of concern to pension schemes trying to manage their liabilities.
“It is worth remembering that there is already flexibility within the funding framework. For instance, if a scheme’s valuation date falls within difficult economic conditions the system provides flexibility in terms of both the form and duration of recovery plans to meet long-term liabilities.”