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Daily Mirror
Daily Mirror
Business
Levi Winchester

Bank of England doubles down on emergency measures to protect pension funds from collapse

The Bank of England has said it will double the daily limit on its emergency gilt-buying programme before the scheme ends on Friday.

The daily limit will be upped to £10billion, an increase from £5billion originally.

Bank of England chiefs were forced to step in last month after the pound sunk to an all-time low against the US dollar following the Mini-Budget.

The market turbulence sparked a huge sell-off of Government bonds - or "gilts" - which are often bought by pension funds as an investment.

Some of the bonds lost around half their value in a matter of days - sparked fears that some pension funds were hours from collapse.

The Bank of England intervention on October 14 was widely thought to have prevented black holes in the accounts of many retirement savings firms.

It is feared pension funds “would have been left with negative net asset value” and cash demands they could not have met.

The Bank of England said it has so far bought only around £5billion of UK Government bonds under the £65 billion programme.

The scheme will end this Friday, October 14.

The Bank said: "To date, the Bank has carried out eight daily auctions, offering to buy up to £40billion, and has made around £5bn of bond purchases.

"The Bank is prepared to deploy this unused capacity to increase the maximum size of the remaining five auctions above the current level of up to £5billion in each auction."

The property market was also thrown into chaos after the Mini-Budget last month - with mortgage rates rocketing as a result.

Lenders were spooked after analysts predicted that interest rates will rise to 6%.

More than 1,000 mortgage deals were pulled from the market as a result - with many now returning at a much higher rate.

The markets now expect the Bank of England base rate to peak at around 5.25% to 5.5% in 2023, after Chancellor Kwasi Kwarteng was forced into a U-turn on one of his major Mini-Budget proposals.

Mr Kwarteng had announced plans to abolish the top tier 45% income tax rate after the move was criticised as only helping the 1% of workers who earn above £150,000.

This now won’t happen - but mortgage rates are still climbing and have been going up since last December.

The Bank of England hiked its base rate to 2.25% at the end of last month - its highest level in 14 years and seventh increase since December when the rate was 0.1%.

Bank chiefs will next meet on November 3 to discuss whether to raise interest rates even further.

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