Pound plummets again after Bank of England sets Friday deadline for pensions

Governor of the Bank of England, Andrew Bailey, has told pension funds ‘you’ve got days left’ (Picture: Metro.co.uk)

The clock is ticking for pension fund managers responsible for the money of millions of Brits – with a warning they have two more days to balance their books.

Fresh turmoil is feared for the markets after the Bank of England refused to extend emergency support beyond Friday.

Threadneedle Street was forced to intervene when a market meltdown was triggered by Liz Truss and Kwasi Kwarteng’s mini-budget.

It comes amid fears that the UK could be in recession after the economy unexpectedly shrank in August for the first time in two months.

But BoE governor Andrew Bailey pushed aside pleas for an extension while in Washington.

‘My message to the (pension) funds involved – you’ve got three days left now. You have got to get this done’, he said, speaking on Tuesday.

‘Part of the essence of a financial stability intervention is that it is clearly temporary.’

His comments appeared to prompt a dramatic fall in the value of the pound, which fell more than a cent against the dollar to its lowest rate since September 29.

The Pensions and Lifetime Savings Association, representing the industry, welcomed the Bank’s intervention but warned against ending it ‘too soon’.

Following Mr Bailey’s remarks, sterling fell more than a cent against the dollar to its lowest rate since September 29 (Picture: PA)

In a statement, it suggested help should be extended at least until October 31 – when the Chancellor is due to showcase his plan for balancing government finances following his £43 billion tax giveaway.

Alternatively, the PLSA said ‘additional measures should be put in place to manage market volatility’.

The Bank took emergency action on September 28 when the mini-budget market chaos caused the pound to tumble and yields on gilts to soar, which left some pension funds across the industry close to collapse.

Threadneedle Street warned of a ‘material risk to UK financial stability’ after yields on long-dated gilts soared once more on Monday, despite action by the Bank and government to try to allay investor concerns.

It will now widen the scope of its bond-buying programme to include purchases of index-linked gilts – a type of UK government bond that tracks inflation. 

On Monday, the Bank doubled its daily bond-buying limit to £10 billion, saying: ‘the beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts’.

‘Dysfunction in this market, and the prospect of self-reinforcing “fire sale” dynamics pose a material risk to UK financial stability.’

It added that its latest efforts will ‘act as a further backstop to restore orderly market conditions’.

The move came as the Institute for Fiscal Studies (IFS) think tank warned the Chancellor will have to find spending cuts of more than £60 billion if he is to meet his target to get the public finances back under control.

Neil Wilson, chief market analyst at Markets.com, said the Bank’s third tranche of bond-buying action ‘seems rather messy and panicky’.

He said: ‘As expected the market was always going to retest the Bank’s resolve and put the Budget to the sword.

‘To expand your emergency intervention in the market once is unfortunate, to do so twice looks like carelessness.’

Shadow chief secretary to the Treasury Pat McFadden said: ‘That the Bank of England has been forced to step in for a second day running to reassure markets shows the Government’s approach is not working, and creates renewed pressure for the Chancellor to reverse his Budget.’

Get in touch with our news team by emailing us at [email protected].

For more stories like this, check our news page.

The Bank of England’s Governor has pushed aside pleas for more emergency support.