MoneySavingExpert.com homepage
Cutting your costs, fighting your corner
Founder, Martin Lewis · Editor-in-Chief, Marcus Herbert
Search bar closed.
MSE News

Pension income could fall due to quantitative easing

elderlycouple
Helen Knapman
Helen Knapman
News & Investigations Editor
7 October 2011

Pensioners could soon get a reduced income when buying a retirement cash stream, experts warn.

It is feared rates on annuity plans – where you give your pension pot to an insurance company in return for a regular income – will fall following yesterday's decision by the Bank of England to pump an extra £75 billion into the financial system via quantitative easing (QE).

One of the impacts of QE, which is effectively the printing of money, is it forces down the return on gilts – which are government-issued bonds the Bank buys with that cash – as the demand for them rises.

Annuities are partly priced on gilts, so if yields fall, annuity providers will pay out less. As a result, pensioners could get less when buying an annuity.

According to data from pensions provider Hargreaves Lansdown, when quantitative easing happened in 2009, there were 18 annuity rate cuts.

Tom McPhail, from Hargreaves Lansdown, says a similar situation could happen again. He warns: "Don't delay buying an annuity in the hope of a short term bounce in rates. It may happen but there is no strong reason to expect it."

If you are considering buying an annuity, remember to scour the market first to find the best rate. Don't automatically take one from your pension provider as the chances are it won't pay the best income.

MSE Forum

Annuity rates

Forum image
MSE Email icon 4 February 2025

For all the latest deals, guides and loopholes simply sign up today - it’s spam free!

Add £1,000s to your pension
Martin's 16 pension boosters
Car insurance 16% cheaper
Don't settle at renewal
New cheapest loan
Now under 6%
Delay EV road tax
With our trick
Barclays outage help
How to reclaim
20 Walkers 90p
With our code
Sky TV price hikes
Your rights explained
Tools and calculators

Clever ways to calculate your finances

Find your odds of getting top cards
Find your odds for getting a cheap loan
Compare broadband, phone & TV deals
Compares thousands of mortgages
Eight calcs to help you work out the cost
We ensure you’re on the cheapest tariff