Bank of England has now unveiled plans to start buying up corporate bonds as part of its £75 billion ‘quantitative easing’ (QE) policy, and, as has been covered previously on this website, this could cause annuity rates to fall. The Bank said it would start to buy ‘high quality’ sterling corporate bonds from the 25 March, in addition to the gilts it is already buying on a week by week basis.
The Bank has so far purchased about £7 billion in government bonds under the Asset Purchase Facility (ASF). This move which has pushed down yields in that market. The Bank now hopes to do the same in the corporate bond markets. Probably best to get some annuity quotes now; don’t wait.
The Bank of England initially plans to hold reverse auctions for these corporate bonds four times a week, buying up between £2-£5 million of bonds each time. However, the purchases will be limited to bonds rated BBB- and above from ratings provided by two ratings agencies.
In addition the Bank said it was ‘announcing its readiness’ to buy bank bonds under its Credit Guarantee Scheme (CGS), but only if a ‘deterioration in market conditions’ is witnessed.
So, what to do? If annuity rates are going to fall further because of all this, is now the right time to buy your annuity?
Or might you be better off looking at alternative solutions for your retirement planning. Difficult decisions need to be made. Check out ‘Retirement Options’ for assistance.
