Property is a better investment than a pension and will provide better security of income in retirement, according to Andy Haldane, the Bank of England's chief economist.
'It ought to be a pension but it is almost certainly property,' he said. 'As long as we continue not to build anything like as many houses in this country as we need to, we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.'
While the benefits of owning property are obvious to all and make perfect sense, says Haldane, the pension system is hugely and needlessly complicated: '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.'
The value of property in the UK has soared to £8.8 tln (€10.3 tln), according to the latest official data from the Office for National Statistics, an increase of £493 bn from the end of 2014. House prices rose by 7% in 2015. By contrast, pension funds have been struggling to provide adequate returns in the current low interest rate environment and many are running large deficits.
Haldane practices what he preaches, as he owns two properties in the UK, his main residence in Surrey and a holiday home in Kent. However, after a long career at the Bank of England he is also due to receive a pension of over £80,000 a year when he retires.
His remarks have been strongly criticised by Ros Altmann, until recently the UK's pensions minister. She said it was 'irresponsible' and 'divorced from reality' to suggest that people should rely on their property investments instead of having a diversified investment strategy to provide for their retirement.
