More financial stress on the way for retirement savers
The Bank of England is set to scupper the hopes of retirement savers by cutting interest rates and printing more money to inject in to the stuttering economy.
Commentators and City analysts are bracing themselves for an interest rate cut to 0.25 per cent – which would be the lowest official interest rate ever.
At the same time, the bank is considering another £50 billion round of quantative easing to boost the flagging economy in a bid to kick-start jobs and growth.
The move would pull the rug away from under pension savers.
Even lower interest rates would slash the little return the over 55s see from savings and making living on a fixed income even tougher unless inflation dropped significantly in the short term, which is unlikely until at least the end of next year.
While quantitive easing squeezes the value of pension funds by restricting returns on investment.
Quantitive easing, or QE, will let the government buy billions of pounds worth of gilts by the end of the year, which dilutes the returns on trading or cashing in the bonds.
The Pension Investment Corporation reckons the last round of QE cost pension schemes £74 billion and led to a number of companies pouring cash in to their pension schemes.
The Bank of England has suggested gilts would have traded a full point higher without the last round of £200 billion of QE.
The Chancellor, George Osborne, has also ruled out the hope of tax cuts to ease the pressure on savings and investments.
Osborne is due to address the Tory party conference with a rallying cry for the economy – but has told the Daily Telegraph he is ‘unlikely’ to offer any reduction in income tax before the next election because the country cannot afford them.
He has refused to rule out extra taxes on £1 million homes while deferring any debate on scrapping the 50p tax rate until next year.