Pragmatic guidance is urgently needed to offset the impact of quantitative easing (QE) on pension scheme deficits, Prospect’s general secretary, Paul Noon, has warned.

The union, which represents professional engineers, said that following the Bank of England’s (BoE) additional cash injection of £50bn into the economy last week, taking the total amount of QE stimulus to £325bn, the demand for UK gilt has reduced returns to investors by about one per cent. It has therefore asked Pensions Minister Steve Webb to press the issue for further guidance.

The Pensions Regulator has been notified about this concern and said that it will issue new guidance in April but the union says that action is needed now.

Speaking about the effects of QE, Noon stated that “it has been estimated by the Pensions Protection Fund that this has increased defined benefit scheme deficits across the UK by as much as a third.

“Employers are likely to close schemes with large deficits, and money that employers can ill-afford will have to be diverted to repair those deficits,” he added.

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