Tom McPhail, head of retirement policy at Hargreaves Lansdown has criticised a Bank of England economist for saying property is a better place to put money than a pension.
Andy Haldane of the Bank of England told the Sunday Times he would rather invest in a property rather than put money into a pension scheme.
He said: “It [the best investment] ought to be a pension, but it’s almost certainly property.”
In response, Mr McPhail said it was “probably quite easy” for someone with a gold-plated final salary pension to dismiss the importance of saving in a pension for later life.
“Andy Haldane’s pension benefits are estimated to be worth in excess of £3 million, which is not bad going for someone who professes not to even know how pensions work. Perhaps we should take away his final salary pension and just give him another house instead.”
“After his previous comments, we wrote to Mr Haldane, offering to explain how pensions work. After these latest revelations from him, we suggest his employers make a pension training course compulsory, given he has so much influence over the savings and investments of millions of ordinary savers and home-owners and so little apparent understanding of how they work.”
Mr McPhail listed a number of reasons why pensions are a good way to save for retirement including the fact the government tops up your saving with tax relief.
For every £4 a basic rate taxpayer puts in, they get £1 free from the government, and for higher rate taxpayers it only costs them £3 to get £5 in a pension.
He added investments grow tax free and a quarter of the money you take out is tax free too.
Additionally employers are required to pay into a pension scheme for you, and for many employees this means they can double their money on day one.
Mr McPhail also noted pensions are cheap to run, typically costing only around 0.75 per cent a year of your pot. However, by comparison, the running costs of a property can easily be as much as 10 per cent of the value.
ruth.gillbe@ft.com
