The law of unintended consequences - Pensions reduced hit by quantative easing.

This illustrates the very difficult place the government and treasury are in trying to balance the conflicting interests of the economy at large and the large number of savers and pensioners who rely on their savings interest.

The yield on Gilts has dropped because the Bank of England (under its quantative easing operation)  has been purchasing Gilts, forcing the price up and therefore yields down.

When a Pension policy matures the policy holder has to purchase an annuity which gives them a guaranteed income for life.  The pension providers buy gilts from to secure this income.   

In a matter of 2 weeks pensioners have found that the annuity income on offer from the pension providers has dropped by around 2% .  This is 2% for how ever long the pension remains in payment.  It is locked in at that rate

The poor rates on savings have reduced the income of the already retired dramatically and now those that are about to retire are being hit by lower annuity rates on offer.

Anyone whose pension policy is about to mature should take advice to get the best annuity rate available and not simply accept the one offered by the pension provider.  Get advice to see if your policy has an OMO (Open Market Option.  Then talk to an IFA to get advice on your best options.