Interest rates held but more QE announced

The Bank of England keeps rates at 0.5% but is to pump an extra £50 billion into the economy.

The Bank of England has held interest rates at their record low of 0.5% but has announced a further £50 billion of quantitative easing (QE).

The QE spending over the next four months will involve the Bank buying up Government bonds (also known as gilts) from banks. This is designed to pump more money into the economy in a bid to kickstart spending and, in turn, growth.

This new raft of QE takes the total amount to £375 billion. The Bank is hoping that a combination of this and the funding for lending scheme announced in June will help dig the UK out of the current double dip recession.

Today’s announcement is bad news for annuity holders, as the Bank buying up the gilts decreases the yield. These yields are one of the factors used to set annuity rates.

Figures from retirement specialist MGM Advantage show that the average annuity income for a 65-year-old man with a £100,000 pension pot has fallen from £7,300 a year in March 2008 to £5,850 this March.

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