Pension savings 'damaged by QE'

The recent decision to extend the quantitative easing (QE) initiative by a further £50 billion to a total of £325 billion dealt a "killer blow" to millions of people's pension schemes.

This is according to Simon Rose of campaign group Save Our Savers, who explained the only impact the move will have is to increase inflation and lead many current retirees into poverty.

He added the value of all savings will be significantly damaged in real terms and claimed there is little evidence the initial £275 billion of QE had any positive effect on the economy.

It was noted that the combination of this measure and the maintenance of low levels of interest - led by the Bank of England electing to keep the base rate at its current record low of 0.5 per cent - will also damage annuity rates.

Mr Rose claimed a pension pot of £100,000, when entered into annuity 20 years ago, would have created an annual income of £15,640.

However, the same action taken now will only provide £5,800, with this figure expected to decline further.

MGM Advantage recently expressed concern annuity is a particularly difficult to matter to negotiate for retirees at the present.

This is because there is a significant gap between the top and bottom enhanced and standard annuity rates, which means individuals with a savings fund of £500,000 could face a shortfall of 54 per cent if they do not seek pension transfer advice and pick an inadequate product.

"Before long, people will notice the effect on their pockets," Mr Rose remarked, adding: "The Bank of England's long-term failure to get to grips with inflation, exacerbated by low interest rates, is leading to a massive injustice."

"QE's one guaranteed effect is to stoke up inflation, just as it has begun to ease back from its peak," the expert stated, claiming the Bank has already admitted inflation has been shored up by QE. 

Ashall Glover Financial Services, pension transfer specialists

Posted by Sarah Williams