22 February 2012

Quote of the day

From the Deputy Governor of the Bank of England, a Mr Charlie Bean (here):
"Someone with a £100,000 pension pot, who could have expected that to yield an annual pension of a little under £7,000 three years ago, would now get just under £6,000. That is a rather substantial income loss. But it is only part of the story," he said.
"Those pension funds will typically have been invested in a mix of bonds and equities. The rise in asset prices as a result of QE also raises the value of the pension pot, providing an offset to the fall in annuity rates."
He added that pensioners should not expect to be immune to the downturn. While savers have been hit by record low interest rates, working households have been squeezed by a 7.5pc fall in real incomes, compared with where they would have otherwise been, as well as rising unemployment.
"Real household income declined a total of 2.5pc in the two years after output troughed, whereas in normal conditions it might have been expected to rise about 5pc in that time," Mr Bean said.
He added: "Savers have every right to feel aggrieved at losing out; after all, they did nothing to cause the financial crisis. But neither did most of those in work, who have seen a substantial squeeze in their real incomes. And unemployment, particularly among the young, has risen. There have been few winners over the past few years." 
Well I can think of a few winners, notably those damn bankers who despite having caused the problem did very nicely on their bonuses.

But Mr Bean should reflect on his attitude.  Reductions in income, whether of pensioners or workers, are not an academic exercise in distributing the pain.  They cause real misery for many people.  Not that Mr Bean would understand ...


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