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Bank of England strikes again claiming ‘property beats pensions’

Haldane-Andy-BoE[1]

The Bank of England chief economist who caused an outcry among advisers for saying they do not understand pensions has argued property is a better bet for retirement saving than a pension pot.

Speaking to The Sunday Times, when asked whether owning a property or a pension was better for retirement, Andy Haldane answered “almost certainly property”.

He says: “It ought to be pension but it’s almost certainly property.

“As long as we continue not to build anything like as many houses in this country as we need to meet demand, we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.

“I would quite like the day to come when that wasn’t the case, but we’ve got a lot of catching up to do.”

In May Haldane admitted he could not make “the remotest sense of pensions” and added “conversations with countless experts and IFAs have confirmed for me only one thing – they have no clue either. That is a desperately poor basis for sound financial planning.”

He told the newspaper: “I must admit that when I said that pensions were complicated, I hadn’t expected it to be a statement of great controversy.

“My experience since then has rather reinforced the impression that most other people find them quite complicated too.”

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Comments

There are 24 comments at the moment, we would love to hear your opinion too.

  1. Hmm… seems this fella lacks the required understanding of PR and media skills. Of course some property has grown faster than some equity/Bond portfolios, but any blanket statement without any context is utter folly. Both have their advantages, but many of those that constantly carp on about property as a great asset, ignore many of the real costs. In any event complexity has not been created by financial services, but by meddling politicians, who lack any long-term strategy.

  2. How would he know? By his own admission he doesn’t understand how pensions work so how can he do a meaningful comparison?

  3. This guy has to go.

  4. Turn our green and pleasant land into a giant housing estate and tarmac infrastructure !

    I weep……. I really do

  5. I can categorically refute this from first hand experience. He is probably not wrong if he is talking about some of the naff pension products from the life companies, with their restricted fund choices and relatively high charges. But the right funds in the right wrapper pitted against most normal and affordable properties – over a reasonable period of time (not counting the last 8 years – no contest – equities win. After all that’s what a pension is (or should be) – an investment in equities. Then of course add back the tax relief and you are even further ahead.
    I think the man needs to put his thoughts more carefully or ensure he is reported more accurately.

    • 22% of the working population earn less than the living wage; pay half their income in rent and cant afford to contribute. Workplace pensions at combined 2% contribution not going to work

  6. I’ll bet he hasn’t opted out of his company scheme to get a buy-to let for his pension!

  7. Sweeping statement and maybe so in certain regions in recent years but….. http://www.thisismoney.co.uk/money/investing/article-2958803/Cash-stocks-property-best-returns-past-30-years.html#ixzz4IoBqzlR1

    A person in his position should stop generalising, he should know better especially after his last faux-pas and if not, then his PR team should sit him down and talk him through it!

  8. So he is advocating investing in a potentially illiquid investment that needs upkeep and maintenance and for all but a few people out there would require taking on debt?

    I think his comments show that economists live in a world of theory rather than fact.

  9. What a numpty. He should resign now. Property = Debt for most people. You cannot buy a property for £50 per month, you do not get minimum 25% tax relief on contributions, you cannot get 25% tax free on access, property is not CGT free, you cannot take a flexible phased income. When the nextproperty crashhappens I hope someone reminds him ofthis statement, wherever it is that he is then working, ‘fries with that’ maybe!

  10. Based on 420,000 maturing pension polices annually; the average fund value is just £25,000, less than one years average Uk salary.

    So he has a point

    • Sorry Ian, but that’s not a good justification. You’ve no idea what the average payments into those pensions was, so cannot compare that with property where someone would have had to either put in a capital sum upfront or, more likely, saved a relatively small amount each month. That and those policies maturing today may well be older contracts with higher charging structures than someone would get starting now.

    • Is this person suggesting that people cash in their pension to dabble in the residential btl investment market? Legal costs, Stamp duty, Estate agents fees; void periods, volatile property valuations. This is an ill thought out statement and he should be called to account by the BofE.

  11. Ian he would only have a point if the contributions paid on average into a pension would have been sufficient to buy a property, maintain it and service the debt.

  12. Well that attracted a lot of comment! However if you step back from this and consider the question apparently posed by the Sunday Times,then that is what is even more ridiculous than Mr Haldanes response: ” Speaking to The Sunday Times, when asked whether owning a property or a pension was better for retirement, Andy Haldane answered “almost certainly property”.
    At retirement and for the duration of this potentially significant segment of a hard working person’s life, they need and deserve both a place to live AND income to meet their living costs and hopefully the costs of enjoying their retirement. It certainly should not be a choice between the two , they are not mutually exclusive and it is a timely reminder for the pension cycnics to bear in mind that people cannot eat the bricks and mortar!

  13. @Ian; statistics, lies and damned lies. “So he has a point” and, Ian, what is that point please?

  14. So says Sid, star of the Ice Age films? Or maybe he’s just a muppet! I DO hope they ask him again after the next London Property crash.

  15. Ian what average contribution generated the average pension pot of £25,000?

    What mortgage/ property value would that average have supported?

    Of course there is a case for property purchase as an investment but I am pretty sure it is mainly for the already quite wealthy

  16. He obviously hasn’t read this piece of research from Paul Lewis, everyone knows that actually cash is the best place to keep your money. http://paullewismoney.blogspot.co.uk/2016/06/cash-vs-shares.html

  17. According to the ST article, Haldane’s BoE pension is “currently worth £83,816 a year” but he doesn’t understand pensions and obviously doesn’t seem to think that is very good.

    This guy is an embarrassment. He should be fired, or at least kept locked up in his office and told to stop making inane comments.

  18. Ian

    What point? Small funds are a result of small contributions. How can someone who pays (say) £50 into a pension possibly afford a property investment?

    As others have said, for the bulk of the population they can afford neither.

  19. He misses the point that not all areas in the UK have rising house prices; I expect he has the London mindset of nothing happens outwith the M25. There are plenty of properties already in the UK, it is more a matter of poor population distribution and if this ever improves with greater de-centralisation of power and influence, his suggestions could be construed as very bad advice indeed.

  20. This person must stop making such sweeping statements, if he is so keen on property as an asset, then surely the best course of action would be to hold a property in a pension fund either SIPP or SSAS, He would then be buying his property using gross pre taxed income, he had also better keep some cash in equities in case the property market crashes as it has done on many occasions over the years. If he had a PR man which obviously he doesn’t, I am sure he would be aimed at a really good IFA. before you all scream at me this would obviously not be a strategy someone putting £50 per into his pension could adopt. However the question was aimed at him, and I assume he has a better than average salary and probably wont be buying property in the back end of one of our poorer northern cities.

  21. Poor PR and/or out of context quoting or not reading what was actually asked and replied.
    A property or A pension.
    Buying a home to live in (say your old council house) and living on a state pension is doable.
    Buyimg multiple property rather than saving via a pension (property i.e. LAND, equities etc) a pension is a tax wrapper and NOT an asset class.
    The comment about lack of house building is economical right.
    I am not advocating undiversified pensions invested only in commercial property due to illiquidity and risk of one asset class.
    I suspect that those critical here on his quoted statement would find if they were discussing his thoughts with him face to face, they would be much nearer to agreeing. This is purely a reporting and PR gaff by a non politician human being.

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