MP's want compensation for pensioners suffering low interest rates

Graham_Devon

Millions of thrifty pensioners who have had their retirement plans shattered by the Bank of England should be given compensation, MPs say today.

A damning report lays bare the crippling impact on the recently retired and savers of the Bank’s decision to pump £325billion into the economy.

Since so-called quantitative easing began three years ago, campaigners have highlighted how older people have become the sacrificial lambs of the Bank’s emergency rescue policy.

The aim of QE has been to keep interest rates low to boost economic growth, prevent a wave of mortgage repossessions and pump money into the flagging economy.

But today the Treasury select committee makes it clear that an urgent lifeline must be thrown to those hurt by QE.

It also highlights the plight of savers since the Bank cut the base rate to a historic low of 0.5 per cent in 2009, describing the combination of low interest rates and QE as ‘extremely lax monetary policy’.

The report says: ‘We recommend that the Government consider whether there are any measures that should be taken to mitigate the redistributional effects of QE.’

It calls on ministers to ‘consult’ on any help, such as compensation, that could be given at the time of the Autumn Statement, expected in November.

Which leads me to ask....

How could you compensate pensioners alone? Would others not also be able to make their case? Such as middle aged savers?

The BOE argues that the effect of QE may have been mitigated by rising asset prices stimulated by QE. Is this evidence that the BOE were trying to increase house prices? Pensioners generally only have a home that could benefit from this....so why would they say this otherwise?

http://www.thisismoney.co.uk/money/pensions/article-2131347/MPs-say-pensioners-savers-compensated-income-destroyed-QE.html

CRASH_BANG_WALLOP

compensate the boomers? :mad: they are plenty of young dudes who save so why just compensate older people

chewmylegoff

There is no real reason why pensioners should be protected from the effects of a recession. The minimum income guarantee is in place, to ensure a basic standard of living for pensioners. Housing benefit etc is available if needed, specific benefits e.g. winter fuel allowance, free travel also exist.

I don't see why in addition to the benefits system that exists to protect pensioners, the government would need to specifically compensate pensioners for loss of interest due to economic conditions.

wotsthat

Graham_Devon wrote: »

The BOE argues that the effect of QE may have been mitigated by rising asset prices stimulated by QE. Is this evidence that the BOE were trying to increase house prices? Pensioners generally only have a home that could benefit from this....so why would they say this otherwise?

I suppose it could be considered evidence if someone is minded to believe conspiracy theories and they generally ignore the bigger picture.

What surprises me about stories of this nature is that there seems to be an assumption that 'losers' i.e. savers in this case never react to changing financial conditions.

Low rates are working in that they are encouraging people with cash to invest and find higher returns. BTL is taking a bigger proportion of the housing market and more pensioners than ever are starting their own businesses. There's been a positive feeding frenzy on the ISA board about the 4.25% ISA from Nationwide.

mjm3346

What about compensation for borrowers when interest rates were high then? Swings and roundabouts.

Radiantsoul

Presumably you could remove the tax on saving on those over 65. I am not sure this would cost that much with interest rates being so low.

However savers should be aware that in rescuing the banks they avoided large capital losses on their savings. This needs to be offset against losses emerging from lower real interest rates. Personally I would not favour any intervention.

Graham_Devon

chewmylegoff wrote: »

There is no real reason why pensioners should be protected from the effects of a recession. The minimum income guarantee is in place, to ensure a basic standard of living for pensioners. Housing benefit etc is available if needed, specific benefits e.g. winter fuel allowance, free travel also exist.

I don't see why in addition to the benefits system that exists to protect pensioners, the government would need to specifically compensate pensioners for loss of interest due to economic conditions.

A lot of it is to do with annuities though.

QE specifically reduced these. So I guess that's where the MP's are coming from? Though I still don't understand how they could compensate just one section of society!

The wider implications of this though are starting to show. People are starting to get annoyed at low rates and QE. If the treasury select committe are coming up with these sorts of things then that says quite a lot to me. It's not even about buying votes for once!

SecondLegDownIsTheBigOne

Other sources suggest that they are considering all savers not just pensioners. "Pensioners" has useful emotive value for the meeja.

McKneff

mjm3346 wrote: »

What about compensation for borrowers when interest rates were high then? Swings and roundabouts.

In a lot of cases, pensioners today and the borrowers when interest rates were high are the same people.

I get my state pension, well 60% but I do remember at one time when we were paying a mortgage with a 16% interest rate.:eek:

Generali

Compare and contrast these 2 articles from the Torygraph today:

http://www.telegraph.co.uk/finance/economics/9210207/Britain-faces-50bn-more-spending-cuts-and-tax-rises-to-cover-elderly-care-warns-IMF.html

Britain faces £50bn more spending cuts and tax rises to cover elderly care, warns IMF

Britain faces another £50bn of spending cuts and tax rises to cover the costs of age-related care and put the national debt under control, the International Monetary Fund has warned.

http://www.telegraph.co.uk/news/politics/9210294/Time-to-reward-elderly-say-MPs.html

Time to reward elderly, say MPs

Pensioners and savers who have been 'penalised' by the Bank of England’s money-printing operation should be compensated by the Government, MPs to announce.

The bill for the latter would have to be added to the former presumably.

ruggedtoast

They can either have high house prices and low interest rates, or high interest rates and low house prices. They can't have both unless even more inter generational wealth gets shoved up the inverted pyramid ,from those who have least to those who have most.

Four Pete's sake that couldn't happen could it?