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Quantitative Easing: Hitting Those With Lower Annuities/ 17.10.2011• Rajan Chagger• Posted At 06:00 PM

The Bank of England’s (BoE) second round of quantitative easing which was announced at the start of the month is expected to impact annuity rates by sending them down further. The implication of this is that those who are close to retirement and suffering at the hands of lower pensions and rising life expectancy will have to deal with another reduction in annuity rates.

Drop yield return

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The plan from the BoE is to inject £75 billion into the United Kingdom economy. This will be done through buying government bonds which will raise the price of gilts and therefore drop the yield that can be expected.

This yield is very important since this is what insurers use to price UK pension annuities, this has a direct impact on those people in society who are very close to retirement since if the income they will achieve drops they do not have an adequate amount of time to recover those losses in income.

If you are looking to add to your retirement income using a safe and affordable scheme, consider a stakeholder pension.

To compound this issue, quantitative easing could also potentially instigate an increase in inflation as after the second round comes into force there will be more money in the economy. Which means that prices could be pushed higher, as such inflation will also rise.

“Drive down annuity rates”

Have a look at our annuity table below for mor einformation on rates to suit your needs.

If you are interested in finding out what your pension is worth at retirement, use our pension calculator.

Gemma Goodman  who is employed by Alexander Forbes Annuity Bureau said on the matter of falling annuity rates that it “was worrying news for those approaching retirement, especially given the Bank of England’s decision to increase its QE programme, which reduces the interest rates on gilts and corporate bonds and drive down annuity rates further.”

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