Dr. Ros Altmann is a pensions and economics policy expert and former investment banker, who has advised Governments, corporations, trustees and the pensions industry.

Treasury Select Committee demands evidence on QE impacts

by Dr. Ros Altmann

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Dr Ros Altmann, Director- General of Saga, comments on today's report from the Treasury Select Committee on the impact of QE on pensioners:

Quantative Easing (QE) is a massive monetary experiment that has not clearly boosted the economy as intended but instead has boosted inflation and damaged pensions, impoverishing many pensioners. The Bank of England's attempt to aid the economy with QE is akin to a doctor applying medicine to cure a patient without considering any of the side effects.

These damaging side effects are likely to have worsened the economy. Inflation has definitely dented consumer confidence and QE has worsened pension deficits, forcing firms to spend more money on their pension schemes instead of their businesses. Well over a million pensioners have also locked into lower lifetime incomes when having to buy annuities at artificially depressed rates.

Buying gilts with newly created money is a recipe for more disaster, it is not an economic cure, and it merely shifts the pain of over indebtedness forwards and sideways across generations without tackling the underlying problem. The following measures could help to rectify these damages caused by QE:

  • We need to find more direct ways of stimulating the economy such buying assets other than gilts and encouraging pension funds to invest in infrastructure.
  • Lending money directly to small companies rather than relying on the banks, which have failed to do so, would also provide a boost.
  • Issuing longevity gilts would help pension schemes match their liabilities.
  • There should also be a specific effort to help savers - such as increasing the annual ISA allowance.
  • The Pensions Regulator should factor in unusually low gilt yields when considering company contributions into pension schemes.
  • The most important point here is for the Bank of England to recognise that just forcing gilt yields lower is not a remedy for economic recovery and indeed has had side effects that are making growth slower.
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