Press release


Thursday 9 February 2012

Following today’s decision by the Bank of England to extend Quantitative Easing by a further £50bn, Saga claims the move is a panic measure from a flawed policy, that the market is being distorted and pensioners are being unduly punished.

Dr. Ros Altmann, Director-General of Saga, said "The Bank of England has consistently ignored the dreadful damage that its QE policy is inflicting on older people.  With annuity rates falling by about 25% over the last four years as a result of QE, over a million pensioners will be permanently poorer for the rest of their lives as they have bought an annuity at rates that have been artificially depressed by the Bank of England.
The Bank of England’s QE policy will have disastrous side-effects for the wellbeing of millions of people in the UK relying on annuities to fund their later life as the more gilts the Bank of England buys, the harder it becomes for people to buy good value pensions. But it doesn't stop there, company pension deficits have already ballooned to £85bn, placing ever more strain on employers.
Unfortunately we are entering a vicious circle and the Bank has got itself into a fix. If it doesn't buy gilts then the price of gilts will tumble and that makes the deficit harder to finance, yet if it does buy gilts it continues to pile more pain onto pensioners and damages growth, without enough offsetting stimulus.
It must be remembered that the aim of QE is to stimulate the economy and fight 'deflation'. But the economy is not as weak as feared. We are not facing deflation, the rate of inflation is still far too high and therefore more QE seems like a panic measure which is another roll of the dice but may not work out anyway.  Why are we taking such massive risks?  And making pensioners permanently poorer when they did nothing wrong at all. We are calling on the Bank of England to review how it operates its policy.
Ros Altmann suggests alternative measures that she believes could be more useful than the QE policy:
1.  Create new money and drop pounds notes from a helicopter, so people can spend them
2.  Use newly created money to underwrite small business loans to spread some of the risk that lenders take
3.  Use newly created money to lend directly to small businesses who are starved of credit and want to expand
4.  Set up a new lending institution to lend to growing companies
5.  Use newly created money to fund infrastructure projects alongside pension funds