The Bank of England's Deputy Governor, Monetary Policy has rather irritated British pensioners...
WELL DONE Charlie Bean. The Bank of England's Deputy Governor for Monetary Policy has managed to infuriate savers and pensioners – again, writes Simon Rose of Save Our Savers.
At a speech this week he talked about QE's effect on annuities, agreeing that a £100,000 pension pot would produce an annual pension of just under £7,000 three years ago, but would now be under £6,000 now. As he says, "that is a rather substantial income loss".
But then he claimed: "It is only part of the story. Those pension funds will typically have been invested in a mix of bonds and equities, with perhaps a bit of cash too. The rise in asset prices as a result of quantitative easing consequently also raises the value of the pension pot, providing an offset to the fall in annuity rates." In other words, "Stop complaining. Pensioners are actually better off than they are making out." Given that pensioners and many savers are on fixed incomes which are being undermined to the tune of over £40 billion a year by the Bank of England's policies on inflation and quantitative easing, Mr. Bean wins no prizes for tact.
As Neil Duncan-Jordan of the National Pensioners' Convention, said, "The aptly named Mr. Bean is gaining a reputation for making inappropriate remarks about pensioners."
In September 2010, Bean admitted that one reason for having low interest rates was to get people spending.
"Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit." He maintained that older savers had probably benefitted from years of house price rises.
You do wonder if the people running the Bank of England have the slightest idea of the human cost of their policies. These unelected bureaucrats who are blighting the lives of millions of people have pretty comfortable pay and their own pensions are beyond the reach of all but a few. Mervyn King gets paid £308,252 a year and is sitting on a substantial pension pot which, in 2010, was increased by a third from £3.95 million to £5.36 million.
As for Mr. Bean, his pay was £165,000 in the year to February 2009, then jumped to £254,292 in 2010 and £260,988 last year. As for his pension, the pot was a measly £1.435 million in the year to February 2009. Then, as most of the country suffered from the effects of the banking crisis, it jumped to £1.973 million the following year, an increase of over half a million pounds. Clearly Charlie couldn't possibly be expected to retire on so paltry a sum so in the year to February 2011, it jumped by over half a million pounds again, to £2.52 million.
Mervyn King is paid £408,252 a year and has a pension pot of £5.36 million
Charlie Bean's pay is £260,988 and his pension pot has mysteriously increased by half a million pounds two years running to £2.52 million.
To add insult to injury – and Charlie Bean is pretty handy at insulting those whose lives he and his colleagues are ruining – he admitted in 2010 just how badly the Bank of England had got things wrong. In August 2008, in what was almost a boast, he told the Royal Statistical Society that he and his colleagues had put the chance of the economy contracting more than 1.5% at 1 in 20 while the chances of a contraction of 6% (which was exceeded) were "virtually negligible".
Given their complete lack of foresight, and their persistent underestimation of the inflation rate, what confidence can we have that £325 billion of quantitative easing, money conjured up from thin air, will boost the economy and not kick inflation skywards?
After all, as Charlie pointed out in his latest speech, £325 billion is a fifth of the country's entire annual output and a third of the total amount of issued government stocks. Small beer, it is not.
Time to Buy Gold?...