Bank strategy 'boosts wealthiest'

The wealthiest 5% of Britons have seen their fortunes increased further by the Bank of England's economy-boosting efforts while many pension funds have suffered, the Bank has revealed.

Its quantitative easing (QE) programme has increased total household wealth by 16%, or £600 billion, after increasing the value of assets. But it is the richest households - holding around 40% of these assets - that have benefited the most, according to the Bank.

Its report into the impact of its £375 billion QE programme, which was launched in the wake of the financial crisis, also found that pension funds with hefty shortfalls will have seen their deficits increased further.

However, the Bank said QE has helped the UK avoid an even worse economic battering.

It said: "Without the Bank's asset purchases, most people in the United Kingdom would have been worse off.

"Economic growth would have been lower. Unemployment would have been higher. Many more companies would have gone out of business. This would have had a significant detrimental impact on savers and pensioners along with every other group in our society."

The report comes in response to the Treasury Select Committee's request for more detail on the effects of QE after increasing criticism of the programme because of its impact on pension annuity rates and gilt yields.

The Bank rejected fears that QE has hurt pensioners, saying that while it has lowered annuity rates, it has also increased the value of assets in pension pots. Retirees already drawing an income from a company or personal pension will also be mostly unaffected by the programme, according to the report.

Dr Ros Altmann, director-general of Saga, said the Bank was wrong to suggest that pensioners have not lost out and said QE was causing "significant economic damage".

"A brief examination of the facts does not support the argument that QE has pushed up asset prices by at least as much as it has depressed annuity rates," she said. "Investments in equity markets have been hugely volatile and the overall performance of the stock market has not risen sharply in recent years, whereas gilt yields have moved sharply lower and annuity rates have plummeted."