Nigel Green’s comments follow governor Mark Carney’s unveiling of the BoE’s biggest stimulus package since the financial crisis.
He said: “There are noble aims behind cutting the interest rate and the plans to pump an additional £60bn ($79.4bn, €71.3bn) of electronic cash into the economy to buy government bonds.
“But slashing the rate to historic lows and extending the existing QE initiative to £435bn in total is going to unleash more catastrophic damage on pensions, pension funds and, potentially, the UK’s long-term sustainable economic growth.”
Green warned that cutting the interest rate will actively discourages people from saving when the UK needs to promote a savings culture to tackle the growing pensions crisis.
Lower pensions, bigger deficits
“The BoE’s raft of measures will, of course, further push down government bond (gilt) yields. Lower yields mean lower pensions, as the money paid out from annuities and income drawdown policies falls.
“A different solution - a more direct way of boosting growth - rather than forcing gilt yields lower, has to be found by the Bank of England.”
“Anyone recently retired or on the cusp of retirement is at risk of having the retirement income they saved severely eroded by the Bank of England’s policies.
“These falling gilt yields will also further drive up pension deficits. It was widely reported recently that the UK’s pension funding hole has hit a record high of £935bn. This is expected to soon hit a trillion.
“Unsurprisingly, this enormous black hole will hang heavy over many company pension schemes and in order to survive at all they will need to impose radical changes to the members of their schemes.
“And as these deficits soar, companies running such pension schemes will need to divert more and more money to make up the shortfall instead of using this money to grow their business – again this is bad news for economic growth.”
"Slashing incentives for people to save, making millions of pensioners – a critical demographic for the economy - permanently poorer, and further crippling company pension funds can never be the answer to the country’s economic woes.
“A different solution - a more direct way of boosting growth - rather than forcing gilt yields lower, has to be found by the Bank of England,” Green said.