Quantitative easing misery for pensioners and savers How does this help? The idea is that QE will cut the cost of borrowing for individuals, companies and the Government. This encourages consumers to spend and firms to invest, and allows the Government to get away with less austerity (less of its tax revenue needs to be spent on debt interest). By putting more money into the economy, the hope is that banks will lend more willingly, again helping spending and investment - both of which are vital to prevent the economy sliding into a deep recession. Why would buying gilts make mortgages cheaper? A big new buyer in the market pushes up the price of anything, gilts included. As these bonds pay a fixed rate of interest, a rising price means less income as a percentage of the value - in other words, a lower yield. Gilt yields act as a benchmark for borrowing costs across the economy, so interest rates generally will fall. Also, the presence of a "buyer of last resort" in the Bank of England reassures other investors, giving further support to the market. Is it working? It's hard to say for sure, as we don't know what would have happened without QE. Government borrowing costs are at historic lows, but that is partly due to gilts being seen as a safe-haven asset amid the eurozone crisis. Cheap mortgages are available, but it's hard to qualify for these loans. Many consumers and businesses simply don't want to borrow when the economic outlook is so uncertain. But surely cheap borrowing is bad news for savers? Indeed. Savings rates are at historic lows. But the pain is particularly for those retiring now who need to buy an annuity. The income from an annuity is linked to gilt rates, so annuity rates are also at record lows. Who else is suffering from QE? Pensioners who chose income drawdown, even if they did so before annuity rates fell, have been hit by falling gilt yields because the maximum income they can take is linked to returns on gilts. While lucky members of final salary schemes are not directly affected, the schemes themselves are, which could more under pressure to close to new members. Zoe Lynch, a partner at Sackers, the pension's law firm, said: "Lower gilt yields also increase liabilities in defined benefit occupational pension schemes. Last month the liabilities measured by the Pension Protection Fund reached record levels, increasing by £95bn to £312bn. That is a staggering increase in one month alone and is largely due to gilt yields. And that's not just empty numbers - all that money has to be found from somewhere to plug the gap in funding in those pension schemes, at a time when employers are under pressure anyway. This increase in costs could drive even more employers into insolvency. Will annuity rates rise again when QE is reversed? Sooner or later, gilt yields are sure to return to more "normal" levels. But no one knows when this will be, and there are also other factors exerting downward pressure on annuity rates. If life expectancy continues to rise, then, other things being equal, annuity rates will fall. What can I do to get more from my annuity? The most important thing to do is ensure the annuity company knows about any health or lifestyle issues that could affect your life expectancy. Do you smoke or take prescription drugs, for example, or have you ever been in hospital? Then, even if your pension provider offers you a better rate, shop around. Just as with savings and mortgages, annuity companies drop in and out of the best-buy tables as their appetite for business fluctuates. If you can't bring yourself to lock in for life to today's rock bottom annuity rates, you could look at fixed-term or investment-linked annuities.