subject: A First Round Of Qe Pushed Gilt Yields Down [print this page] The National Association of Pension Funds (NAPF) has said that QE disappointed the yield on UK government bonds which is known as gilts is a staple investment for pension funds, making it more expensive to pay for future liabilities. Britain's central bank expanded its stimulus measures by 125 billion pounds to try and kick-start economic growth, pushing yields on longer-dated debt to record lows in the past six months. As a result, the cost to Britain's pension industry of the Bank of England's latest round of QE could total 90 billion pounds, diverting company cash away from investment in the economy so as to plug in retirement fund deficits.
NAPF also said that this was in addition to a first round of QE launched in March 2009 of 200 billion pounds, which is estimated to have pushed gilt yields down by around 100 basis points, increasing pension fund liabilities by around 180 billion pounds. The NAPF strictly warned that the cost to defined contribution schemes are also rising as annuities that many British retirees buy to ensure a steady income become more expensive. Businesses running final salary pensions are being clouted by QE. And the deficits that were already big look even bigger now because of its artificial distortions.
An average man with a pension pot of 26,000 pounds can now expect 22 percent less income as compared to four years ago at a loss of 440 pounds in a year. The pensions industry demanded to the authorities acknowledging that pension deficits have been distorted by stimulus measures, and concrete adjustments to mitigate their effects. The NAPF, which provides 1,200 pension schemes in the UK, having 15 million members and assets of around 800 billion pounds, is now calling on the BoE and the Pensions Regulator in order to address the concerned issues. Need cash in this economic slump apply with 12 month loans no credit check and get easy funds you require?
Charlie Bean, the Deputy Governor of BoE said that the effects QE might be having on pensions. He said that pensioners should not be immune to the downturn and would have to share the burden with the rest of the population. David Miles, the BoEs policymaker has rejected criticism that QE has been bad for those about to retire. While QE has increased the cost of annuities, this was largely offset by a rise in the value of their investment funds.
