BANK OF ENGLAND RIGHT TO HOLD BACK ON FURTHER QEThursday 4 October 2012
· QE policy only valid for an economic emergency · Policy has damaged the economy via its effects on inflation, annuity and drawdown rates and pension fund deficits · Saga’s latest Quarterly report shows that the over 50s are still cutting back on spending – contributing to a £25bn decline in GDP
BANK OF ENGLAND RIGHT TO HOLD BACK ON FURTHER QE
Dr Ros Altmann, Director-General of Saga comments:
“I am very pleased the Bank has decided not to create any more new money. Quantitative Easing (QE) is a drastic policy experiment that may be valid for an economic emergency to avoid depression but we are clearly not in a depression. Indeed, we may be emerging from recession and, with inflation still above target, the Bank is right to hold off from any more measures. Especially since its past buying of gilts has had such damaging negative side effects on pensions and companies with pension deficits.
“QE has also caused inflation which, coupled with low interest rates, has sapped consumer confidence and damaged people’s spending as well as their savings. This is particularly an issue for older generations who rely on the income generated from the savings they have worked hard for all their lives.
“As well reducing spending amongst older people, QE has also has decimated corporate pension funds, forcing some firms into bankruptcy while others have had to divert resources into supporting their pension schemes rather than business expansion. On top of this, QE has reduced over a million pensioners' incomes via annuity and drawdown income falls. These effects destroy jobs and growth, so it seems that policies designed to provide a boost to our flagging economy may have actually had the opposite effect.”
Saga’s latest Quarterly report, which tracks the over 50's quality of life, wellbeing and impacting economic factors, has shown that the majority (55%) of older people are more concerned with the rising cost of living than they were a year ago and this has caused them to reduce their non-essential (47%) and essential (18%) spending this quarter.
Saga also recently conducted a piece of research on the effects of QE on older people’s incomes, revealing that reduced spending amongst older people as a result of the gilt buying policy may have led to a £25bn fall in GDP.
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