Loose monetary policy penalising pensioners and savers, say MPs
18 Apr 2012
The Bank of England’s quantitative easing policy is penalising pensioners and savers, a committee of MPs has claimed.
In a report on the Chancellor’s recent Budget, the Treasury Committee said quantitative easing was having an adverse effect on pensioners’ annuity returns, while low interest rates were hindering savers.
‘Loose monetary policy, achieved through quantitative easing and low interest rates, has redistributional effects, particularly penalising savers, those with 'drawdown pensions' and those retiring now,’ it said.
‘The Bank of England has argued that some of those effects may be mitigated by the increase in asset prices stimulated by quantitative easing. While the aggregate of savers and pensioners may have received some benefit from higher asset prices, there will be many individuals who will not have benefited.’
The Bank of England has injected £325 billion into the UK economy since 2009. The money is used to buy government bonds as a way of stimulating the economy.
Meanwhile, interest rates are currently at a record low of 0.5%.
The Committee’s report continued; ‘We recommend that the Government consider whether there are any measures that should be taken to mitigate the redistributional effects of quantitative easing, and if appropriate consult on them at the time of the Autumn Statement.’
The MPs also raised questions over the Chancellor’s decision to reduce the additional rate of income tax from 50% to 45%, adding that the costs and benefits were ‘highly uncertain, and could be significantly more or less than the cost included in the Budget’.
A Treasury spokesman said: ‘We will study the report and respond in due course.’