"Conversations with countless experts and independent financial advisors have confirmed for me only one thing - that they have no clue either."
Speaking at the New City Agenda annual dinner, 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 advisors have confirmed for me only one thing - that they have no clue either. That is a desperately poor basis for sound financial planning."
He added that a "damaging cycle persists" because of the difficulties consumers understandably face when trying to compare financial products, and raised concerns that the risk associated with financial decisions is "these days being shouldered, not by the state or companies, but by individuals".
As an example, Haldane stated the secular shift away from defined-benefit towards defined-contribution pension schemes which places the investment risk of pensions "squarely on the shoulders of the individual, rather than companies".
Commenting on Haldane's remarks, Andy James, Head of Retirement Planning at Towry, said: “The current complexity is much a part of the mire of legislation, so to lay the problems at the door of Providers is somewhat disingenuous. Certainly, the lack of sensible use of pensions as a retirement vehicle can come down to individuals not really understanding them and therefore unsurprisingly many are not willing to save into them. There is however also the issue that even if you do understand them, can you be sure what they will look like when you come to take benefits? These are long term savings vehicles and constant changes in the way that they work does nothing to instil confidence.”
“I am also disappointed that Mr. Haldane feels the advisers he has been speaking with do not understand pensions. Frankly, in my opinion, he has been speaking to the wrong people. The industry as a whole is well versed in pensions and whilst 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.”
Haldane moved on to champion CMA proposals to establish bank-funded price comparison websites and create greater transparency around bank charges.
However he raised concerns that improvements are becoming "the result of regulatory intervention by the competition authorities, not market-led initiatives by industry".
Haldane continued: "They resulted from regulatory push, not customer pull. This suggests fiduciary concerns still may not course through the banking bloodstream as freely and easily as would be ideal. They help explain why that Great Divide remains so wide.
"The Bank of England itself has an important role to play in this public education effort. Decisions made on interest rates in the economy and on credit provision by banks have an important bearing on the general public’s financial decision-making. To that end, one of the Bank’s strategic priorities over the next few years is to increase public awareness of the Bank’s thinking and actions, using new methods such as videos, cartoons and social media, to help the general public’s financial decision-making."
