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MSE News: Pension income could fall due to quantitative easing

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MSE News: Pension income could fall due to quantitative easing

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MSE_GuyMSE_Guy MSE Staff
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This is the discussion thread for the following MSE News Story:

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

  • oldvicaroldvicar Forumite
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    On this occasion, the experts are correct. Another nail in the private pensions coffin.
  • PincherPincher
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    I wonder, if you play the lottery every week for 40 years, and re-invest small payouts, versus paying the same amount into a pension for 40 years, which is more likely to give a better return.

    The American lotteries don't give you the money you win. If you win $100million, you get $5million a year for 20 years. The Net Present Value is of course far less than $100million. It does resemble an annuity, though
  • jamesdjamesd Forumite
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    "it forces down the return on gilts" is wrong. It forces down the yield (effective interest rate), not the return. In the short term the return on gilts increases because the capital value increases to produce the lower yield. Yield and return are not words that can be used interchangeably.
  • gadgetmindgadgetmind Forumite
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    jamesd wrote: »
    Yield and return are not words that can be used interchangeably.

    Yes, it sounds like the writer didn't understand bond/gilt yield curves, which is inexcusable for someone commenting on this subject.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • gadgetmindgadgetmind Forumite
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    Pincher wrote: »
    I wonder, if you play the lottery every week for 40 years, and re-invest small payouts, versus paying the same amount into a pension for 40 years, which is more likely to give a better return.

    Glad you asked. With a high degree of certainty, the lottery will lose your entire capital whereas pensions will return about 6% above inflation. Choose the lottery if you want, but I know where my money is going.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • ProxyProxy Forumite
    245 posts
    oldvicar wrote: »
    On this occasion, the experts are correct. Another nail in the private pensions coffin.

    Actually, not.

    The volatility of markets and the eurozone crisis have done far worse to gilts in the last few weeks than this new QE has done. The effects of this announcement have been comparitively mild.
  • oldvicaroldvicar Forumite
    1.1K posts
    oldvicar wrote: »
    On this occasion, the experts are correct. Another nail in the private pensions coffin.
    Proxy wrote: »
    Actually, not.

    The volatility of markets and the eurozone crisis have done far worse to gilts in the last few weeks than this new QE has done. The effects of this announcement have been comparitively mild.

    Actually, it is so :p!

    If what you say is far worse (I will agree), that's my 1 nail, plus your far worse 2 nails, equals 3 nails in the coffin ...
  • edited 8 October 2011 at 8:47AM
    ProxyProxy Forumite
    245 posts
    edited 8 October 2011 at 8:47AM
    Any damage to gilt yields has already been done. The Market has already reacted to this announcement and it wasn't especially significant.

    The ongoing eurozone turmoil has caused 10 times more problems for gilt yields than QE2 has or will.
  • dunstonhdunstonh Forumite
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    I dont think it is a nail in the coffin of "private" pensions.

    It is more like a nail in the coffin of the secured income option (annuities) and hopefully a review of the GAD limits and a look at alternative income options for the unsecured income option.

    We also need to remember that these things cycle. You cannot take the good without suffering some bad. You need to average out.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • gadgetmindgadgetmind Forumite
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    Long term, I expect my pension to be in better shape as a result of this turmoil.

    Reason 1 is because I'm paying in every month.

    Reason 2 is here -
    http://citywire.co.uk/money/sharpen-your-asset-allocation-skills-to-profit-from-the-volatility/a529862
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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