The announcement takes the total QE investment by the Bank's Monetary Policy Committee (MPC) to £325bn. It will also continue to hold the rate of interest the Bank of England charges other banks to lend money to them at 0.5% - a rate which has remained constant since March 2009.
However pensions bodies and consumer rights organisations, including Saga and Which?, have argued that the move would impact on pension schemes' investment returns. To maintain the same level of investment return, employers and employees will need to increase contributions, they said.
Saga director-general Dr Ros Altmann described the move as a "panic measure" based on flawed policy. Over a million pensioners would be permanently poorer for the rest of their lives as a result of falling annuity rates caused by QE, she said.
"We are not facing deflation – the rate of inflation is still far too high and therefore more QE seems like a panic measure. Why are we taking such massive risks and making pensioners permanently poorer when they did nothing wrong at all?" she said.
Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, explained that quantitative easing was particularly bad news for defined benefit pension schemes, which are schemes that promise a set level of pension once an employee reaches retirement age no matter what happens to the stock market or the value of the pension investment.
"QE lowers gilt yields and interest rates which affect the assumptions actuaries use in calculating the cost of providing benefits in defined benefit schemes. The effect of those assumptions is to increase defined benefit scheme deficits," he said.
Coupled with recent poor returns from investments made on the stock market by pension funds, quantitative easing resulted in a "double whammy" for defined benefit schemes, he added. Joanne Segars, chief executive of industry body the National Association of Pension Funds, estimated that the last round of QE had increased pension fund deficits by around £45bn.
The MPC meets each month to discuss economic developments independently of government. At this meeting it votes on the Bank Rate, which is the interest rate charged to other banks to allow them to purchase central bank money. This rate can be cut when the Bank of England is concerned about inflation.
When interest rates are almost at zero and cannot be cut further, another option is to increase the quantity of money in circulation in a process called QE. This involves the Bank injecting more money directly into the economy by buying assets from private sector institutions such as insurance companies, pension firms, banks or other companies and crediting the seller's bank account. This means the seller has more money to spend or invest further, while the seller's bank has more money 'on reserve' to lend to consumers.
The majority of the extra money has been used to buy government securities, known as gilts, pushing up their prices. This results on the 'yield', or return, on those gilts falling as a percentage of the price.
Restructuring law expert Alastair Lomax, also of Pinsent Masons, said that further QE was "encouraging" for borrowers when considered along with recent positive figures on the balance of trade and manufacturing output. "Of course, how this will trickle down to the real economy remains to be seen," he said.
"Anecdotal evidence suggests that fears over continued weakness in the economy are driving UK business to hoard cash and not to spend it. Despite the requirements of Project Merlin, lenders are coming under increasing pressure to strengthen their balance sheets, which inevitably makes it more difficult for them to lend. These factors make it difficult to feel confident that much of this new money will be spent in the real economy in the short-term so as to achieve the growth that we all hope for," he said.
Under the Government's Project Merlin arrangement the UK's 'big four' lending banks - Barclays, HSBC, Lloyds Banking Group, RBS and Santander - had agreed to make it easier for smaller firms to access credit. Figures released by the British Bankers' Association last week indicated that the banks had exceeded their overall lending targets, but had only loaned £74.9bn to small and medium-sixed enterprises (SMEs) against a commitment of £76bn.
"It is interesting to note that this latest round of QE comes as the Chancellor decides to drop the lending requirements imposed a year ago on the five main banks under Project Merlin in favour of a 'credit easing' scheme designed to reduce the costs of borrowing to small businesses. It remains to be seen whether the Government's offer to guarantee £20bn of bank funding will enhance lending to SMEs," added banking colleague Tony Anderson.