Quantitative easing (QE) will not have a significant impact on pensioner incomes, Charles Bean, deputy governor of the Bank of England (BoE) has claimed.
Gilts are used as one of the factors in pricing annuities. After the government's first round of QE in 2009, annuity rates fell by 6%, according to figures from Aldermore.
Over-50s group Saga has repeatedly complained the combination of falling annuity rates due to QE, combined with high inflation eroding pensioner buying power, is contributing to poverty in retirement.
However, Bean, deputy governor for monetary policy at the BoE, said the negative effects of QE on annuity rates will be countered by the increase in value of government assets held in pension funds.
"A lot of the discussion tends to focus on one side of the story, the impact on annuity rates, and forget the other side of the balance sheet, which is that asset purchases are supposed to drive up assets. That is why yields fall," Bean told a Treasury Select Committee (TSC) hearing.
"There's a tight mathematical link between the two.
"While annuity rates might have been driven down by asset purchases the value of holdings in pension funds will have been driven up, so that compensates for the decline in annuity values, at least if the pension fund is in a rough balance."
However, he added: "If the pension fund has a significant deficit then that deficit is obviously widened."
In October 2010, Bean angered IFAs and consumers when he suggested people should have spent money then whilst interest rates were low instead of saving.
Who made the cut?
Transferring out of DB scheme
It shocks you