The government should take advantage of low yields and issue special pension gilts, Ros Altmann has urged.
The former Downing Street pensions adviser said pension scheme members had already lost money following recent interest rate cuts and quantitative easing, such as buying long gilts, could also be counterproductive.
In a letter to the FT today, Altmann added: "It would damage pension funds and insurers, which are already struggling with soaring liabilities. Government should in fact take advantage of exceptionally low yields to issue more paper before the gilt "bubble" bursts. Why not issue special pension or annuity gilts?
"Hundreds of billions of pounds of long duration, limited price inflation and perhaps (at last) longevity/mortality gilts could be sold to willing domestic buyers. This would also reduce reliance on overseas investors financing ballooning fiscal deficits."
Altmann also called for a "radical reform" of pensions to cope with the ageing population.
She said: "Most western economies have been living beyond their means for years, in effect borrowing money from the future. Demographically, this is a disaster. Dramatically falling birth rates after the postwar baby boom mean insufficient younger cohorts to produce future growth.
"Yet they will shoulder the repayment burdens as millions of those older workers are about to leave the labour force. Increased borrowing will worsen the payback problems.
"Yes, fiscal expansion is needed, such as reintroducing the 10p tax rate or temporarily lowering national insurance, rather than the ineffectual VAT cut. However, it is essential to cut wasteful public spending and run a tighter ship, notwithstanding vested political and union interests.
"We also require urgent radical reform of pensions and retirement to cope with demographic drag. Government should take charge, organise direct lending to viable private businesses and resist aggravating the coming inflationary crisis via more damaging rate cuts or monetary easing."Professional Pensions
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