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LONDON | Fri Oct 7, 2011 10:35am BST
LONDON (Reuters) - Britain's pension funds have warned the Bank of England's latest round of quantitative easing to help revive the stalled economy will put an onerous burden on companies as it drives up the cost of funding payments to retired workers.
Quantitative easing depresses the yield on UK government bonds, known as gilts, making it more expensive to pay for future liabilities, pension funds association the NAPF said.
On Thursday the Bank announced a new round of stimulus, expanded by 75 billion pounds, to try and kick-start economic growth, pushing yields on longer-dated debt to record lows.
"This measure has adverse consequences for pension funds in the short term. Quantitative easing makes it more expensive for employers to provide pensions and will weaken the funding of schemes as their deficits increase," said Joanne Segars, Chief Executive of the NAPF.
"All this will put additional pressure on employers at a time when they are facing a bleak economic situation."
Segars added the NAPF is writing to the Pensions Regulator, requesting a meeting to discuss ways to protect funds.
The NAPF's concerns were echoed by consultant Aon Hewitt.
"This stands to place even more of a burden on UK companies already buckling under the weight of the pension promise, with implications for employment and hence the economy," said Colin Robertson, global head of asset allocation at Aon Hewitt.
(Reporting by Chris Vellacott; Editing by Laurence Fletcher and Erica Billingham)
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