QE Doesn’t Hurt Pension Funds
The lobbying by pension funds against QE must qualify as some of the most ill-advised special pleading ever seen. Yet the National Association of Pension Funds insists on adding to the shrill attacks by Ros Altmann, filling the press with stupidity like this time and again:
Quantitative easing has knocked another £90bn off the value of final-salary pension schemes, says the National Association of Pension Funds (NAPF).
The Bank of England should take some blame for this situation by making the argument that monetary easing works primarily by lowering long-term interest rates.
Fortunately the Pension Protection Fund provide us with data on what actually happened to the funding position of UK defined-benefit pension funds during the first round of £200bn QE:
In March 2009, the aggregate balance of DB schemes in the PPF was in deficit by £200bn. By the end of the programme, the schemes were roughly balanced, and then went into surplus. This should be no surprise, as long-term gilt rates went up slightly during this period, and the FTSE soared; reducing liabilities and raising assets respectively.