Bluefin is urging the pensions minister, Steve Webb, to consider further measures to offset the impact of QE on pension schemes, including smoothing the discount rate used to value liabilities.
Julie Stothard, head of actuarial and investment at Bluefin, said:?"Quantitative easing has had some positive effect on the UK pensions industry, as the Bank of England has recognised. For one thing, it has kept many businesses afloat throughout the financial downturn, ensuring the continuation of company pension schemes that might otherwise have collapsed.
"Nevertheless, our research suggests the impact of QE on defined benefit scheme deficits is significant. For every pound the Bank has spent through QE, one pound has been added to DB pension scheme deficits.
"There are a number of ways to potentially offset this impact. Countries such as Denmark, Sweden and the Netherlands have had considerable success by smoothing their discount rates. With gilt yields falling to record lows, there could be considerable benefits to the UK following the Danish example of using the market rate only for pricing short-term duration bonds, and a fixed rate for those with longer durations."
