QE2 and Your Pension

12th October 2011

Quantitative Easing (QE), the injection of £75 billion pounds of new money into the economy, is a double edged sword.  Whilst it is intended to keep interest rates down for longer which should help the economy as a whole, it has a serious impact on savers.

Most will not consider themselves as “savers” whilst just getting by on their income, and obviously lower rates will be a relief to those of us with mortgages and loans to repay, but most of us also have some sort of pension pot which is a saving and will be affected by quantitative easing.

Pension pots have already suffered due to the recent turmoil in the financial markets and this is unlikely to change in the near future.  Annuity interest rates have fallen and are expected to fall further when the latest round of QE is implemented.  The last round of QE in 2009 had a serious impact on bonds and gilts which are the mainstay of pension funds.

Company pension funds are also being hit badly as QE makes it more expensive for employers to provide pensions. The National Association of Pension Funds (NAPF) has asked for an emergency meeting with the Pensions Regulator to discuss what will happen to pension funds and how they can be protected from further rounds of quantitative easing, citing how important it is that the Pensions Regulator looks at the negative impact that quantitative easing is having on pension schemes.

In these hard times, shopping around for the best annuity is invaluable as is getting advice on different ways of managing the annuity

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