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Qe 'a Monumental Mistake' - Pensions Viewpoint


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you are a heretic and you should be executed

there was a reason that our great leaders removed house prices from CPI and BoE stopped publishing M4 figures

as you can easily win elections if you give people free money

I blame Jesus who turned water to wine and also gave people free fish; perhaps he was the first leftwinger ???

leftwing as in everyone is equal....yes, Id say that was his aim.

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if markets crash, yields increase....and if banks cant get QE, they have to pay more to savers to attract funds.

at the moment, we have the exact opposite.

QE is designed ( Merv and the BoE Said so) to keep asset values up.

Sorry Mr Advocate.....it cant work...money is a construct...it only has any value IF someone has to work to earn it.

I don't think you're getting my point. Here's an example:

Let's say it's 2007 and I have a pension fund invested in equities woth £200,000. I'm due to retire soon. Current annuity rates are 7%, so I'm expecting a 14K a year pension.

Now it's 2008 and financial crisis hits, company earnings fall and the stock markets are down 50%. My pension fund is now worth £100,000. Current annuity rates are still 7%, so my pension will now give me 7K a year.

Now it's 2009-2012. In steps the central banks with QE, yields fall across the board but the stock market recovers all the lost ground. Now my pension fund is worth £200,000 again. However, current annuity rates are 3.5%. So my pension will still only give me 7K a year.

Now I'm going to moan that the BoE has ruined my pension, where actually it hasn't made much difference. The real culprits are the daft actuaries with their simplistic models who told me I'd get 8% a year average investment return and who also told me I could expect to live until I'm 80. Actually I'm getting 4% average return on my investments and I'm now expected to live until I'm 90, so I'm a lot poorer than they told me I would be.

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so you are sugesting that printing a paper to spend it in the public sector (such as the public sector wages) is a great idea and it will take us from the recession?

surelly if it is true we would be all super rich; instead of taxes and state borrowing we can just print a paper and give it to public sector; what a great idea

I'm not saying QE is good or bad for the economy. I'm saying QE is fairly neutral in terms of the impact on incomes of people retiring after 2008 who had a private contributions based pension.

Edited by gimble
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I don't think you're getting my point. Here's an example:

Let's say it's 2007 and I have a pension fund invested in equities woth £200,000. I'm due to retire soon. Current annuity rates are 7%, so I'm expecting a 14K a year pension.

Now it's 2008 and financial crisis hits, company earnings fall and the stock markets are down 50%. My pension fund is now worth £100,000. Current annuity rates are still 7%, so my pension will now give me 7K a year.

Now it's 2009-2012. In steps the central banks with QE, yields fall across the board but the stock market recovers all the lost ground. Now my pension fund is worth £200,000 again. However, current annuity rates are 3.5%. So my pension will still only give me 7K a year.

Now I'm going to moan that the BoE has ruined my pension, where actually it hasn't made much difference. The real culprits are the daft actuaries with their simplistic models who told me I'd get 8% a year average investment return and who also told me I could expect to live until I'm 80. Actually I'm getting 4% average return on my investments and I'm now expected to live until I'm 90, so I'm a lot poorer than they told me I would be.

I beleive the lump sum you saved also is used to calculate the annuity return.

so your £200K STILL counts towards your income....what is reduced is the yield, which in turn reduces part of the pension you are going to get...

A good fund manager would be able to take the dips and rises of a market into account...he could have sold your holdings in equities in 2007, and bought them back when the crash hit...doubling your number of holdings, if the value of them halved...

What you are complaining about is very poor management of your funds by these genii that claim to be worth 300-500K in salary.

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this is the rock and the hard place.

an over borrower gets let off the hook.

meanwhile, a prudent person gets shagged.

This is a Political decision.

It is not done for the good of the "economy", it is done for the good of the lobbyists. That IS what lobbyists are paid for...getting their way. Putting Lion on the streets is the heartstring they pull on.

it is done to win next elections; nobody cares what happens in 10 years; it is just only about the next elections ... give majority freebies so they can have simple easy life and they will vote for you

also there is a problem with a negative political action:

- I loose my house -> I will not vote for you

- I am not able to buy a house -> nobody to blame so I will vote for you

politically best action is to do not do anything or do not do anything constructive, what brings the pain

printing paper or borrowing to spend more is a great example of a good political decision to win elections in next few years

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I'm not saying QE is good or bad for the economy. I'm saying QE is fairly neutral in terms of the impact on incomes of people retiring after 2008 who had a private contributions based pension.

maybe it is neutral for some special case of people in the short term, but in general printing a paper so the public sector can spend it like there is no tomorrow seems like an idea for disaster .... :(

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leftwing as in everyone is equal....yes, Id say that was his aim.

for me the leftwing means giving you free bees without the work - it makes sense for the old and sick, but printing paper so we can have an unaffordable public sector to make everybody happy will end up aka Greece .. as there is nothing like a free lunch ....

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I beleive the lump sum you saved also is used to calculate the annuity return.

so your £200K STILL counts towards your income....what is reduced is the yield, which in turn reduces part of the pension you are going to get...

A good fund manager would be able to take the dips and rises of a market into account...he could have sold your holdings in equities in 2007, and bought them back when the crash hit...doubling your number of holdings, if the value of them halved...

What you are complaining about is very poor management of your funds by these genii that claim to be worth 300-500K in salary.

I think something like 60% of the FTSE is owned by pension funds.. In aggregate pension funds cannot beat the market because they ARE the market. If all the pension funds sold off at the peak and bought at the trough there would be no peak and trough - it's unrealistic to expect a manager to time the market this well anyway. I think my general point still stands, QE has had quite a neutral effect on pensioners so far. What has hurt them is the financial crisis and the stagnation of the Western economies since then - that's killed investment returns because there is no growth. I think there's a strong case that QE is making things worse in terms of fixing our economy, so I agree with people saying that QE is pernicious. I just don't agree with pensioners saying that QE has hurt them (as per the OP), they need to look elsewhere.

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maybe it is neutral for some special case of people in the short term, but in general printing a paper so the public sector can spend it like there is no tomorrow seems like an idea for disaster .... :(

Yes I agree that QE is very dangerous in the bigger picture. I guess I was focusing on the OP that was discussing the idea that pensioners in particular are losing out becuase of QE.

In fact old people are the main beneficiaries of welfare and NHS spending - the deficit is so big, and NHS & pensions are such a large part of spending, that there is no way the government could balance the budget without reducing the entitlements currently enjoyed by pensioners. So in that sense pensioners are the main winners from QE.

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I think something like 60% of the FTSE is owned by pension funds.. In aggregate pension funds cannot beat the market because they ARE the market. If all the pension funds sold off at the peak and bought at the trough there would be no peak and trough - it's unrealistic to expect a manager to time the market this well anyway. I think my general point still stands, QE has had quite a neutral effect on pensioners so far. What has hurt them is the financial crisis and the stagnation of the Western economies since then - that's killed investment returns because there is no growth. I think there's a strong case that QE is making things worse in terms of fixing our economy, so I agree with people saying that QE is pernicious. I just don't agree with pensioners saying that QE has hurt them (as per the OP), they need to look elsewhere.

Alert, alert, alert: another heretic here !!!

So the majority of the share holders are not the greedy capitalist rich bastards, but surprise surprise the pension funds.

So if we tax the businesses more, add more regulation or fine the business for any misconduct we are not punishing the business, but only the consumer on one side and pension funds on the shareholder side

hmm, it seems like the Labor political agenda is f.cked up beyond any repair ????

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Alert, alert, alert: another heretic here !!!

So the majority of the share holders are not the greedy capitalist rich bastards, but surprise surprise the pension funds.

So if we tax the businesses more, add more regulation or fine the business for any misconduct we are not punishing the business, but only the consumer on one side and pension funds on the shareholder side

hmm, it seems like the Labor political agenda is f.cked up beyond any repair ????

in addition, all funds wouldnt sell off at the same time...pensioners can decide just how their funds are invested...they are encouraged to take the risk at the start of the funds with "managed" funds, then later, as the end point nears, they would go for Bonds and Cash...lower risk.

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I'm not saying QE is good or bad for the economy. I'm saying QE is fairly neutral in terms of the impact on incomes of people retiring after 2008 who had a private contributions based pension.

You misunderstand the profile of the average pension fund holder . When you are approaching retirement it is 'normal' to put your pot increasingly in low yielding and risk free assets like cash and near dated gilts ( cash in all but name)

Under your example the Qe would have left the pot unchanged and halved the annuity .

People who have pots that were equity based and were far from retirement ought to theoretically benefit from Qe as their portfolio ought to hedge inflation ( but they're not winners because their future requirements are increased via inflation)

The winners are the indebted , full stop.

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I don't think you're getting my point. Here's an example:

Let's say it's 2007 and I have a pension fund invested in equities woth £200,000. I'm due to retire soon. Current annuity rates are 7%, so I'm expecting a 14K a year pension.

Now it's 2008 and financial crisis hits, company earnings fall and the stock markets are down 50%. My pension fund is now worth £100,000. Current annuity rates are still 7%, so my pension will now give me 7K a year.

Now it's 2009-2012. In steps the central banks with QE, yields fall across the board but the stock market recovers all the lost ground. Now my pension fund is worth £200,000 again. However, current annuity rates are 3.5%. So my pension will still only give me 7K a year.

Now I'm going to moan that the BoE has ruined my pension, where actually it hasn't made much difference. The real culprits are the daft actuaries with their simplistic models who told me I'd get 8% a year average investment return and who also told me I could expect to live until I'm 80. Actually I'm getting 4% average return on my investments and I'm now expected to live until I'm 90, so I'm a lot poorer than they told me I would be.

Only if you make the assumption that QE was 100% responsible for rises in company valuations fromt he lows, there would have been a rebound anyway.

There was a period when pretty much every company was going into stock run down or other measures to realign supply with demand, companies also took the ending of the bubble to slash as many jobs as they could in order to pretty up their finances (although redundancy costs would mean it would not be till a year or so later when that would have positively affected their balance sheets). Orders would have come back as there is only so long you can run stock down and profitability from more efficeint allocation of personnel would have helped too.

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