Pensions: QE affecting Annuity rates, government should do more to help


A committee of influential MPs has said that the government should be doing more to help retirees affected by falls in Annuity rates due to the Bank of England’s policy of Quantitative Easing (QE).

Falling Annuity rates

Reporting back on the recent Budget, the Treasury Committee said that QE was causing Annuity rates to fall and that “lax monetary policy” was “particularly penalising savers.”

Any pension Annuity calculator will show how far Annuity rates have fallen in recent months, caused in no small part by falling gilt yields, which are one of the side effects of the Bank of England’s £325 billion QE program.

Retiring soon? Our advisers can help you make the right decisions

The Investment Sense team of Independent Financial Advisers in Nottingham

Contact our team of advisers today:

0115 933 8433

Online enquiry form

Although there are signs that Annuity rates may have picked up a little over the past couple of months, they are still historically very low and could be pushed down yet further if the Bank of England embark on additional QE measures.

The Treasury Committee said: “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 government has promised to respond to the report in due course, however pension experts don’t hold out much hope of a change in Annuity or indeed Income Drawdown rules.

The Bank of England

Mervyn King, Governor of the Bank of England has previously said that retirees were over estimating the effect of QE on their retirement income, arguing that any loss due to lower Annuity rates was offset by higher fund values after a stick market rally and a surge in gilt prices.

Experts however have pointed out that lower Annuity rates affect a pensioner’s income for life as an Annuity can never be changed.

Furthermore the Treasury Committee has recommended that the Bank of England provides an estimate to pensioners of the overall gain or loss they have benefited or suffered as a result of QE.

Pension Annuity Calculator

If you are planning to retire soon an online pension Annuity calculator is an ideal place to start when researching your retirement income options.

Using such an Annuity rates comparison tool will allow you to see the effects of the various options, for example spouse’s pension, guarantee periods and indexation, will have on your Annuity rate. However, only by consulting an IFA will you be able to compare all Annuity providers, as some do not subscribe to online calculators. Furthermore an IFA will be able to confirm whether you qualify for an Enhanced Annuity, which could provide you with a higher income due to ill health or lifestyle factors such as smoking.

Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email