Claims made by the Bank of England’s chief economist that advisers do not understand pensions have been branded “extraordinary” and “irresponsible” by the industry.
Advisers say the comments damage the reputation of financial services and undermine efforts to boost consumers’ confidence in the sector.
Speaking at an event for think-tank New City Agenda in London last night, Andy Haldane confessed to not being able to make sense of pensions and that conversations with financial advisers had proved “they have no clue either”.
Haldane’s comments were made in the context of a need for better financial education in schools, such as teaching how maths can be applied to the real world, such as budgeting, understanding annual percentage rates on loans and deciding on the right savings, pensions and mortgages products.
He said: “To give a personal example, I consider myself moderately financially literate. Yet I confess to not being able to make the remotest sense of pensions. 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.”
Personal Finance Society chief executive Keith Richards says: “There is little doubt that professional advisers are in the minority of the population who fully understand the mechanics not only of pensions but the importance of financial planning in retirement.”
He adds: “For someone in his position it is a very irresponsible broad-sweeping statement that does nothing to boost public confidence and trust at a time when the government is trying to introduce reforms that start to bring back some confidence in the markets given the urgent needs for consumers to start engaging back into the savings culture.”
West Riding Personal Financial Solutions managing director Neil Liversidge has already written to Haldane offering him free pensions advice at his West Yorkshire business.
Liversidge writes: “If visiting Castleford risks being too much of a culture shock for you, however, I’m down in the City fairly regularly and can come to Threadneedle Street. Let me know. The first meeting is still at our expense.”
Advisers add pensions have become over-complicated because of decisions by policymakers.
Apfa director general Chris Hannant agrees: “By saying he does not understand it, which is probably not true, [Haldane] is trying to make a broader point that it is very complicated. The source of complication is the framework we have got.”
He adds: “There is a system to protect consumers – there is the Financial Services Market Act and the FCA authorises people and decides whether they are competent or not. He is basically saying the FCA doesn’t know what it is doing because it has let people loose to advise on these things which seems slightly extraordinary.”
Towry retirement planning head Andy James says Haldane must have been speaking to the wrong advisers to form his opinion the sector does not understand pensions.
He adds: “The industry as a whole is well-versed in pensions and while better education for all in the long term will assist, sensible financial advice is really the only option for those who lack the understanding and/or confidence in the current system.”