Siobhan Mail, Director at Newport-based Seer Green financial planning specialists, said: “The decision to extend the QE programme comes despite some tentative signs of improvement in economic conditions from recent data, although the pace of expansion in the UK’s main export markets has also slowed and concerns remain about the level of debt and competitiveness of some Euro-area countries.
“The move was expected by markets, though some economists had expected even more, and although economists are divided over what the Bank of England will do next, it is expected to extend the programme again in May to coincide with its next inflation report with a final £25bn.
“There are, however, concerns about the impact of QE, which has been shown to raise the rate of inflation, which has been above target for more than two years, although it has begun to fall after peaking in September, giving the Bank more leeway to extend QE.
“The intention of lowering borrowing costs is also potentially detrimental for pension investors, as lower long-term yields from gilts and corporate bonds, and historically low interest rates, mean lower annuity rates, although pensions experts have said that the impact of the eurozone crisis on government bond yields has been much greater so far.
“There is also strong evidence that people approaching retirement in private pensions are not helping themselves, with 13 out of 14 pensioners not only choosing to lock into a lifetime annuity at a historically awful rate rather than explore the increasing range of more flexible options that are continuing to come onto the market, such as short-term annuities, income drawdown, or investment backed – rather than gilt backed annuities.
“Even worse is the fact that nearly all those who choose a lifetime annuity are not even exercising their Open market option to find the best rate on the market, but are just accepting the rate that their pension provider offers- which is rarely the best rate available. This is an area the FSA have shown a keen interest in, and where expert advice from an experienced Independent Financial Adviser is vital, if people are to avoid spending their retirment worse off than they need to be.”