The Bank of England (BoE) has defended its use of quantitative easing (QE) but admitted that it would mostly benefit the top five per cent of households.
Its initial analysis of the effects of QE on the economy comes after a request by the Treasury Committee to explain the costs and benefits of its actions.
An additional £375 billion has been injected into the economy through QE since 2009, with the bank rate also cut to its historic low level of 0.5 per cent, in an attempt to stimulate the country's economy following the first recession.
In its report, the Bank described the effect of QE as "Causing the price of gilts to rise and yields to fall, in turn leading to an increase in demand for, and price of, a wide range of other assets, including corporate bonds and equities."
It added, "By pushing up a range of asset prices, asset purchases have boosted the value of household's financial wealth held outside pension funds, but holdings are heavily skewed with the top five per cent of households holding 40 per cent of these assets."
The BoE said that without QE, people in the UK would have been worse off, with greater unemployment and businesses going insolvent.
However, Dr Ros Altmann, director general of Saga said the bank had failed to properly address the impact on vital demographic groups, 'in particular the 21 million over 50s who have been negatively impacted.'
She said: "The damage is particularly problematic, yet the Bank keeps suggesting it is not due to QE. The reality is very different. Buying gilts and artificially driving down gilt yields which underpin both defined benefit and defined contribution pensions is causing significant economic damage, is permanently impoverishing pensioners, is pushing up inflation and damaging consumer spending. All the negative impacts need to be taken more seriously."
She highlighted that there was no evidence to support the Government view that pension savings had gone up and were offsetting the fall in annuity rates - the main way of converting a pension fund into a regular income.
The BoE report stated that the impact of QE would have a 'broadly neutral impact' on pension funds, but would particularly affect defined benefit pension schemes.