The Bank of England came under renewed pressure last night to raise interest rates as millions of pensioners saw their income fall for the third year in a row.
On the eve of today’s meeting of the Monetary Policy Committee pensions expert
Dr Ros Altmann said the decision to keep rock bottom rates has had ”devastating consequences” for the UK’s 13.5m pensioners, who she said, “were being sacrificed “ to the Government’s economic policies.
“This really cannot go on, 2010 was the third consecutive dreadful year for pensions and pensioners and without action from the Bank of England it can only get worse”, said Dr Altmann, Director General of Saga. Figures for last year showed that the value of pension annuities fell by at least 2.7%.
“The Bank’s policy of pumping cash into the economy through Quantitative Easing coupled with rock bottom rates has wiped out part of peoples pension incomes, she said. “The lower annuity rates fall, the less monthly income your pension fund will pay you and once you buy at low rates you are stuck with them for the rest of your life”.
Dr Altmann said most people buy annuities that are fixed in money terms, which means there is no protection against inflation. “Inflation, as everyone can see, has been rising sharply as annuity rates have been falling. This is a double whammy for pensioners “
She said that in the past 15 years annuity rates have just about halved. “The income you will receive as a pension in retirement now for £10,000 worth of pension savings is only half as much as it would have been if you had retired then.
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