Bank's comments on QE impact are unacceptable
In a report on the impact of QE the Bank paints the picture of a rosy Britain where falls in pension income due to low gilt yields (exacerbated by QE) are cancelled out by an increase in equities and corporate bonds.Try telling that to soon-to-be pensioners who are watching annuity rates fall ever lower – there have been 23 annuity rate cuts in July and August according to Hargreaves Lansdown.
Rates have fallen 2.6% since July, meaning a 65-year-old man with a £100,000 pension pot will be able to buy an income of £5,591 a year compared with £5,743 at the beginning of July. How can the Bank say QE is not having an impact on pensioners in the face of evidence like that?
The Bank has done well to alienate those coming up to retirement and it has also taken a swipe at those who have already retired. It said that QE is not having any affect on those who have already bought an annuity and are taking an income.
As pensions expert Ros Altmann quite rightly points out, inflation has been pushed up by QE and in turn has eroded the spending power of pensioners' cash. This is basic economics – the higher inflation the less people can buy with their money. It's frightening that this has bypassed the Bank so easily or that it has chosen to ignore it,
The average pensions pot in the UK is £25,000, that's not a lot of income that has to be stretched a might long way. And maybe this is where the problem lies; the Bank of England bods are just so far removed from the 'average person' that they cannot see the devastating affect losing £200 in income a year has for some.
Bank governor Mervyn King is rumoured to have a pension pot worth £2.7 million; it would be fair to say £200 for him is pocket change.
It is all very well for the Bank to make sweeping statements about how ordinary peoples' lives are affected but shouldn't they go and talk to the man on the street first? You can manipulate the figures all you want but it's not going to prevent people walking into poverty in retirement.