The chief economist of the Bank of England cannot “make the remotest sense of pensions”, citing his ignorance to illustrate how difficult it was to understand finance and highlight the problem this poses for rebuilding public trust in the financial sector.
Andy Haldane’s comments about pensions were made in the context of his recommendations for ways to restore trust in finance – “closing the trust deficit”, with a lack of understanding of finance on the part of the public one of two main sides to the problem.
“Part of the reason why so many members of the public find finance difficult is because it is difficult – and, sometimes at least, it is made deliberately so,” he said.
Despite considering himself “moderately financially literate”, he added: “I confess to not being able to make the remotest sense of pensions”.
He added: “Conversations with countless experts and independent financial advisers have confirmed for me only one thing – that they have no clue either. That is a desperately poor basis for sound financial planning.”
Changes in the pension system are making the problem more “acute”, according to Haldane, as “a secular shift” away from defined benefit to defined contribution schemes “places the investment risk of pensions squarely on the shoulders of the individual, rather than companies”.
These shifts underscore the importance of both the existence of “simple, easily understood” financial products and clear information about them, he said.
The new body replacing the Pensions Advisory Services and Pensions Wise is intended to provide a single point of contact for advice on pensions, he noted.
Still, “regulation and education can only take us so far”, said Haldane, going on to speak about the need for changes in “the sociology and psychology of banking and bankers”.
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