QE hits pensions less than feared, says MPC’s Miles

A TOP Bank of England official believes pensioners have not been as badly hit by quantitative easing (QE) as the industry argues.

David Miles yesterday said pensioners should stop focusing on low yields and the low annuity rates that the Bank of England’s extremely low interest rates and QE has forced on them and instead look at the increase in asset prices it has caused.

“The very low level of real yields is related in large part to ‘safe haven’ asset flows,” he said, arguing QE is not the only factor pushing down yields.

The two factors together have pushed down annuity rates by 100 basis points since QE started in March 2009, he said, and focusing just on annuity prices, those approaching retirement have seen the value of their pensions fall by around 17 per cent.

However, once the impact on asset prices is included, “it can offset some, all or more than all of the effects of rising annuity prices,” Miles said.