View more on these topics

Winners and losers from QE, says bank

BoE deputy governor says pension fund boost makes up for plunging annuities

The Bank of England says while its quantitative easing programme has hit annuity rates, pension funds have been boosted by improved performance of equities and bonds.

Giving evidence to the Treasury select committee last week, bank deputy governor for monetary policy Charles Bean said this improved performance compensates for reduced annuity levels.

He said: “A lot of the discussion focuses on falling annuity rates but, by design, asset purchases are supposed to push up the value of equities and bonds and that compensates pension funds for the reduction in annuity rates.”

The bank has pumped £325bn of new money into the economy since March 2009.

When the monetary policy committee announced the latest £50bn asset purchase last month, Saga chief executive Ros Altman said the Bank was “robbing” those about to annuitise.

On March 2, 2009, a 65-year-old man annuitising a £100,000 pension pot would have received an annual income of £4,709. By February 20 this year, that figure had fallen to £3,660.

Altmann says Bean’s comment shows that “he does not have a clue” about how pensions work.

She says: “Permanently impoverishing pensioners is not a fair way of stimulating the economy. Arguing that the stockmarket and gilt markets have benefited ignores the fact that buying gilts undermines the whole pension system.”

Treasury select committee member Andrea Leadsom says the bank is not taking account of the impact of quantitative easing on the wider economy.

Speaking to Money Marketing after the select committee hearing, she said: “It is not accepting that it is picking winners and losers when using QE. The bank says it is just another monetary policy tool and it does not make a difference but it favours borrowers over investors by pushing down interest rates as well as harming pensioners.”

Recommended

8

Co-op undertakes costly past business review of former IFA arm

Co-operative Banking Group is carrying out a redress programme to compensate clients of its former IFA arm for unsuitable advice which could run into millions of pounds. This week’s Money Marketing reveals the firm is is writing to around 1,800 former Co-op IFA clients, with most expected to get a redress offer by the end […]

2

Bank of Ireland increases SVR from 2.99% to 4.49%

Bank of Ireland has become the latest lender to increase its standard variable rate, increasing it from 2.99 per cent to 4.49 per cent. Bank of Ireland has notified customers of its intention to increase the SVR on its UK residential mortgage book by 1.5 per cent.  This change will be implemented in two stages. […]

UK’s AAA rating move didn’t hit

Gilt yields were largely unaffected by Moody’s decision to put the UK’s AAA credit rating on a negative outlook last month, say Bank of England governor Mervyn King. Giving evidence to the Treasury select committee last week, King said agencies provide valuable economic assessments but warned “we should not be slaves” to them. He said: […]

Cofunds appoints chief technology officer

Cofunds has appointed Russ Thornton as chief technology officer. Thornton is now responsible for driving the direction of Cofunds’ systems, business architecture and planned proposition developments and operational efficiency. Prior to Cofunds, Thornton was chief technology officer at management consultancy McKinney Rogers. He reports to chief information officer Stuart Johnson.Thornton will have a seat on […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment