A second round of quantitative easing in the UK will leave the country’s pension funds £90 billion ($141 billion) out of pocket, the National Association of Pension Funds (NAPF) announced on the third anniversary of QE in the UK.
Joanne Segars, Chief executive of NAPF, said:
“Businesses running final salary pensions are being clouted by QE. Deficits that were already big now look even bigger because of its artificial distortions.
“Pension funds want a stronger economy, so they are on board with the QE project for now. But the latest bout of £125bn of money printing has blown a £90bn hole in their side. We need help in managing that. Pension funds cannot be left holding the baby.
“Firms are legally obliged to fill the deficits, and that diverts money away from jobs and investment, and will lead to further closures of final salary pensions in the private sector. Retirees trying to get a good annuity are feeling the pain too – they are getting a fifth less than they would before QE started.
“We need to see stronger action from the authorities on this massive issue, which will hurt pension schemes for some time yet. And there is always the possibility of QE3.”
QE hurts pension funds especially by making government bonds more expensive, forcing buyers onto more risky investments — which, due to their nature, pension funds tend to avoid.
NAPF says that an average person with a pension pot of £26,000 pounds can now expect 22 per cent less income than four years ago at a loss of 440 pounds a year.
Reuters reports that Bank policy maker David Miles has argued that those about to retire should find their costs offset by a rise in their investment funds.
NAPF estimates the first round of QE cost pension funds £180 billion ($283 billion), the BBC reports.
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