Pensions hit as QE comes to a close

Pensions hit as QE comes to a close
Published:  24 Jun at 9 AM
Signs that central banks in both the US and the UK could be about to bring to an end their easy money programmes have seen the value of some pension funds drop by around 5 per cent since the beginning of last month. It is estimated that a pension pot worth £100,000 is now worth £265 less annually than it was at the beginning of May.

Since the credit crisis the value of bonds has been pushed up by policies of Quantitative Easing. However, the value has started to slip as it looks increasingly likely that US Federal Reserve head, Ben Bernanke, is about to rein in money printing.

Hargreaves Lansdown pension investment manager, Laith Khalaf, said lifestyle pension funds had done well since QE began in 2009, but that it may now be time for people to check how their money is being invested.

It is understood that around 750,000 retirees across the UK have invested in a lifestyle programme and over the coming decade a further 1.5 million are expected to be invested into similar schemes.

UK pensions expert Ros Altman has long been critical of the Bank of England’s Quantitative Easing strategy. She explained that the problem with QE is that it distorts the capital markets. Bonds are supposed to be a good bet for pensioners as they minimise risk. However, Altman said QE meant this risk had not been reduced at all.