Pension Income reduced by Quantitative Easing

The Bank of England’s emergency programme of printing money to support the economy has helped push pension incomes to record lows, its own figures showed yesterday.

Experts warned that returns on annuities had fallen so low that people about to retire should seriously consider investing their pension funds elsewhere.

Many pensioners use their retirement pot to buy an annuity, a guaranteed lifetime annual income based on the yields on government bonds, or gilts.

The Bank’s Quantitative Easing (QE) programme has put £275billion of new money into the economy, created by it buying gilts from commercial banks. Increased demand for gilts pushes down the yield, or interest rate, paid to holders, lowering borrowing costs across the economy and stimulating demand.

Campaign groups, including Saga, have warned that lower gilt yields undermine pension incomes.

Research by the Bank’s economists yesterday estimated that the QE programme reduced gilt yields by around 1.5 perc
http://www.pensiondrawdownuk.co.uk/pension-income-reduced-by-quantitative-easing.html