At last week's Investment conference of the National Association of Pension Funds (NAPF) in Edinburgh, the Shadow Chief Secretary to the Treasury, Rachel Reeves said the current Government relies too heavily on the Bank of England's quantitative easing (QE) programme, using it as a smokescreen for its poor fiscal support.
The NAPFcalculated that the latest round of the controversial measure added £90bn to the UK's pension scheme's deficits as it lowers bond yields and increases liabilities.
Labour's Reeves said theBank of England was forced to pursue more QE as the Chancellor's fiscal policy was failing to provide the boost the economy currently needed.
The former Bank of England economist told Pension Funds Onlineat the conference: "I think it is right that the Governor of the Bank of England does everything within his power to limit the slowdown of our recovery, but I do think it's wrong for George Osborne to be relying on the bank in order to try to compensate for the errors of his fiscal policy."
"Currently", she said, "the Government is only focusing exclusively on tax increases and spending cuts with no absolutely regard for the impact on employment and growth." Adding it was the Government itself who "choked off our recovery more than a year ago".
The day ahead of Reeves' speech at the conference, Joanne Segars, chief executive of the NAPF, said in a statement that pension schemes needed to see "stronger action from the authorities on this massive issue, which will hurt pension schemes for some time yet." Segars also expressed her fears for the industry in case there would be a third round of QE.
The gilt buying system, feared to be contributing to the death of defined benefit (DB) schemes has hit pension funds harder than expected, the NAPF said. According to them it will "force businesses to divert money away from jobs and investment and into filling pension fund deficits".
The Shadow chief secretary said that in her own work she had seen that "relying on monetary stimulus when you don't give the economy the fiscal support it needs is ineffective".
Reeves, who served as Labour's former Shadow Pensions Minister in 2010 and 2011, urged schemes to support her party leader Ed Miliband in his call for "responsible capitalism".
"Pension providers also have a critical role to play in supporting the responsible capitalism Ed Miliband has been talking about as engaged investors," Reeves said. "They can hold companies to account and provide affordable, responsible pensions to all who need them."
