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The Difference Between The Best And Worst Pension Incomes Can Be Very Surprising

Aegon Annuities Aviva Annuities Axa Annuities Canada Life Annuities Friends Life Annuities Hodge Annuities Just Retirement Annuities Legal and General Annuities LV Annuities
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Saga suggest QE has had a negative impact on pension pots

The Bank of England (BoE) recently suggested that £375bn worth of quantitative easing (QE) has helped pensioners, while asserting that the bid to pump money into the economy has also acted to widen deficits on many defined benefit pension schemes.

Dr Ros Altmann, Director-General of Saga, has hit back at the BoE’s claims that retirees have benefitted from QE and argued instead that the Bank has failed to shed light on many of the negative consequences of QE.

Dr Altmann argues that the Bank’s assertion that “QE is estimated to have had a broadly neutral impact on the value of the annuity income that can be purchased from a typical personal pension pot” is, in fact, incorrect and that typical private pension funds have failed to keep pace with plummeting annuity rates.

As an example, while annuity incomes have fallen by nearly 25% since July 2007, the FTSE index has fallen by over 10%, during the same period. In addition, annuity income has fallen by over 14% since July 2011, while the FTSE index has fallen by around 2.5%.

Annuity rates have declined by around 1.3 percentage points since the start of the financial crisis, meaning that a pension pot of £100,000 today would buy an annuity of less than £6,000, compared with more than £7,000 in 2007.

The Bank's analysis of the impact of QE is also said to have overlooked those who have income drawdown policies. The respective incomes of this group are said to have been impacted by QE, as the amount that policy holders are allowed to withdraw from their pensions has decreased.

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