Compensation 'owed to hard-hit retirees'

Older people who are seeing their savings and pensions eroded by the Bank of England are owed compensation.

That is according to a report from the Treasury select committee, which says retired people have borne the brunt of the Bank's emergency rescue policy.

The MPs pointed to the numerous rounds of quantitative easing (QE), under which the Bank has pumped £325 billion into the economy.

QE, aimed at boosting economic growth and avoiding mortgage repossessions by keeping interest rates low, has hit retirement plans hard.

Savings are also being whittled away by the Bank's decision to cut the base rate to a historic low of 0.5% in 2009.

The disparaging report calls on the Bank to publish its estimate of 'the overall benefit and loss to pensioners and savers' from QE.

It continues: 'We recommend that the Government consider whether there are any measures that should be taken to mitigate the redistributional effects of QE.'

Michelle Mitchell, Charity Director General of Age UK, said: 'While we accept there is a case for quantitative easing as a way to support the economy, pensioners and those coming up to retirement will worry about the effect on their finances.

'Those converting the pension pots into an annuity over the last few years will in many cases have been forced to accept rates well below what they would previously have got. Buying an annuity is a once-in-a-lifetime decision.

'Even though QE might have protected the value of their pension pots, it's really important that people still feel they are getting good value from their savings and that people continue to save for retirement.

'In addition, quantitative easing helps to keep interest rates low so many of those in retirement who have paid off their mortgage and rely on their savings to top up their income, or replace household goods, are seeing those savings whittled away by inflation far higher than interest rates.'

Copyright Press Association 2012