The best of all possible worlds for the pension industry is a buoyant economy. Workers have enough money to save, share prices rise and dividend growth is robust. Interest rates are positive in real terms so annuities are good value. The economy ground to a halt in 2008. The overwhelming priority for everyone is to get growth going again. Without growth the services that pensioners depend on — such as the NHS — will struggle.
Traditionally, governments cut interest rates and raise spending to get the economy moving. The Bank of England has cut interest rates as much as possible and the government deficit remains very high. We have exhausted conventional policies, and yet the economy is not growing. In these circumstances the Bank of England’s ‘Quantitative Easing’ policies are sensible. There are few alternatives.
As Fraser has
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