The Bank of England has warned interest rates are in a new era and will not return to the levels savers became used to in the second half of the 20th century. It means more pain for final salary pension funds which were set up in a world of higher interest rates. The new world of permanently lower interest rates means schemes face bigger deficits for the foreseeable future.
At the same time savers’ hopes of gaining a better return on their cash will be undermined once more, with little chance of a return to the 5pc levels seen before the financial crisis. Gertjan Vlieghe, a policymaker at the Bank of England, has warned that even when quantitative easing (QE) is unwound long-term interest rates will stay low.
