Press release


Monday 25 June 2012

Responding to Professor David Miles interview with the Financial Times where he calls for further rounds of Quantative Easing, Dr Ros Altmann, Director-General of Saga comments on how more QE will damage pensioner incomes and hinder economic growth.

“Before it embarks on another round of QE, I would urge the Bank of England to carry out a comprehensive and balanced assessment of the impact of gilt buying on the economy. It is time the Bank of England stood back and considered whether QE is, indeed, a stimulus to the economy. The Bank of England needs to seriously analyse whether QE has worked and, certainly from current levels, whether it may infact have no more mileage. Through its impact on pensions and pension funds, QE has actually damaged growth. From current low levels of gilt yields, printing further money to buy gilts is unlikely to stimulate growth and could indeed make growth worse.

"Conjuring up a further £50bn of new money, in order to buy government debt at unprecedentedly expensive levels could be saddling future taxpayers with large losses when long term interest rates return to levels that reflect our economic fundamentals in the future.

"So far the Bank has failed to produce evidence that the policy has actually stimulated growth or employment. It has relied on assumptions that the alternative to QE would have been complete economic meltdown. This is improvable. It is important to note that buying gilts is not the same as stimulating economic growth. And there has been no official assessment of the damage done by QE to corporate and consumer spending via its impact on pension deficits, annuities and income drawdown. QE has forced firms to fund their pension schemes and forced over a million pensioners to buy much lower retirement incomes. Low interest rates, high inflation and deteriorating pensions have lowered growth and employment, but the Bank has so far failed to quantify the effects.

"Given that we are in a double dip recession, bank lending is falling and lending rates have been rising, it is far from clear that QE is the right policy to get the economy going. Given the damage it is doing to pensions, I would urge caution and careful consideration with a balanced analysis of how the policy works.

“Distorting the gilt market is dangerous, it undermines our pension system and has side-effects that actually damage growth. This policy may seem to make sense in academic models, but in the real world, with our ageing population and pension system that is underpinned by gilt yields, QE simply may not work.