★ FTWeekend
11 April/12 April 2015
4
JOSEPHINE CUMBO
— PENSIONS CORRESPONDENT
The UK’s pension industry has appealed to customers not to rush into cashing in their savings as they reported record call volumes triggered by major reforms that came into force this week.
Pension providers said they experienced unprecedented numbers of customer enquiries after savers aged 55 and over were given new flexibility to cash in their savings as of April 6.
There are no industry-wide figures yet, but providers reported that some customers were cashing in funds to spend on property purchases, pay off debt, update their kitchens and pay off spouses in divorce cases.
Scottish Widows described the week as a “watershed”, saying it had handled about 12,500 calls on the pension changes since Monday, in addition to
1,000 online instructions from clients wanting to cash in their savings. In total, this represented just over 2 per cent of eligible customers, said the company, partof Lloyds Banking Group.
“Weexpectcallvolumesandenquiries to continue at this level for a number of weeks and we are prepared to deal with two years’ worth of normal demand in a two or three month period.
“Our message remains the same — people should not rush in and make a
Only a very small number of people have called Pension
Wise, the government’s free guidance service
30-minute decision on what to do with
30 years’ worth of savings.”
Fidelity reported a “significant” increase in call volumes with about a fifth of its customers in company pension plans wanting to cash out, with the average amount being £34,000.
“This may seem ill-advised, but for wealthier individuals the tax levied on full withdrawal is only marginally higher than they would pay in drawdown on higher rate tax,” the company said, adding just over 1 per cent of eligible customers had given instructions to cash in their entire pension pots.
“We would tell all of our customers to not rush to exercise the new freedoms just because they now can.”
It added that some customers planned to use their cash on holidays and home improvements. One planned to buy her ex-husband’s share of a holiday home as part of a settlement.
Canada Life said its customer enquiries this week were up a third, with about three-quarters wanting to cash in funds.
“We expected our customers to be excited about the new pension freedoms,” said Canada Life. It added its customers were releasing cash for business ventures, to help relatives get on the propertyladderandtopay for weddings.
However, the provider said that “worryingly” only a small proportion had used Pension Wise, the government’s free guidance service that provides information on cashing in savings.
“While flexibility is an advantage for pension savers, the breadth of choice, potential tax and other implications of
12,500
Number of calls handled by
Scottish Widows since Monday
£34,000
Average amount
Fidelity says savers want to cash out
10,000
Pension Wise’s weekly capacity for face-to-face or telephone appointments cash withdrawals mean professional financial advice is more important than ever to ensure that individuals make the right choice,” said Canada Life.
The Treasury said Pension Wise had capacity for 10,000 face-to-face or telephone appointments a week, but would not say whether bookings had increased since the reforms came into force.
“It’s early days, but it’s very important that people are aware of the free guidance so they can find out about their options and the risks of the new retirement market,” said Dominic Lindley, an independent consumer campaigner.
Ros Altmann, an independent pensions expert, said she had seen no evidence of a “stampede”, but Pension
Wise should be more widely promoted.
See Money separate section
FERDINANDO GIUGLIANO
— ECONOMICS CORRESPONDENT
In the wake of the financial crisis, university economics departments drew unprecedented criticism from their own students for being out of touch with current events and failing to include real-world questions in their subject matter.
A new economics course being tried out in universities around the world is attempting to address these complaints and open students minds to to a broader range of approaches.
The “Core” project — motto: “Teaching economics as if the last three decades had happened” — is led by Wendy
Carlin, a professor at University College
London, and has won the financial backing of the Institute for New Economic
Thinking, a research group funded by billionaire George Soros.
The plan is to extend it beyond the institutions that have signed up to the year-long pilot, including Sciences Po in
Paris and the University of Sydney.
At a lecture theatre in UCL, first-year undergraduates grapple with complex economic questions such as what causes a property bubble. This is the final session of the 21-unit Core course.
Core stands for “Curriculum Openaccess Resources in Economics” and data play a big part in the teaching, with new material on economic crises, the environment and inequality.
One of the demand and supply charts used to talk about property bubbles has prices from the US housing market between 2006 and 2008
— as does interactive material including on-the-spot quizzes.
“I did not know about Core when I came to UCL,” says An, a 19-year-old
Vietnamese student who spent the lecture annotating slides on her computer. “It is a very broad course, which is what really makes it interesting.”
However, some students say the programme is not nearly radical enough in challenging mainstream economic thinking.
“Core is not a pluralist curriculum,” says Yuan Yang, a founder member of
Rethinking Economics, a network of student groups that aims to change the way the subject is taught.
“It presents one paradigm, while students should be able to choose among different schools of thoughts.”
Prof Carlin accepts these criticisms, but says that she is not aiming to
Students attending the Core lectures at University College London seem engaged with the wide — and ambitious — range of material presented
— Charlie Bibby
T he financial crisis of
2007-09 and subsequent economic malaise has shaken the confidence of economics they are being taught in unimany young people in the versities. It has also shaken the confidence of the public in the wisdom of economic policy makers. This loss of confidence is understandable. Economics was put to the test and, in important respects, found wanting.
This raises a question: what should now be taught in universities.
A part of the answer will come from developments within the field. In time, the incorporation of new ideas and techniques may make the academic discipline better at addressing the intellectual and policy challenges the world confronts. Economists, it turns out, did not know some of the things they thought they knew. Indeed, the very compartmentalisation of the professional discipline got in the way of such an understanding.
Another part of the answer, however, must come from asking what an undergraduate education should achieve. The answer must not be to produce apprentices in a highly technical and narrow discipline taught as a branch of applied mathematics. For the great majority of those who learn economics, what matters is rather appreciation of a few core ideas, on the one hand, and of the complexity of the economic reality, on the other.
At bottom, economics is a field of inquiry and a way of thinking. It has a number of core ideas. Among these are: opportunity cost, marginal cost, rent, sunk costs, externalities and effective demand. There are many more such simple ideas, which continue to possess considerable relevance and explanatory power.
Economics also allows people versed in its core concepts to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth. Such an understanding matters to students at least as much in their role as citizens as in their activities as workers or entrepreneurs.
It is not necessary to possess a vast technical apparatus to understand these core ideas. Indeed the technical apparatus can get in the way of understanding.
Much of the understanding can also be acquired in a decent, but not inordinately technical, undergraduate education.
That is what I was fortunate enough to acquire in my own years studying Philosophy, politics and economics at
Oxford in the late 1960s. Today, I believe, someone with my own background in the humanities would be lost.
In addition, though far more difficult in the time available, it is very helpful to expose students to heterodox alternatives to orthodox economics. This can only be selective. But exposure to the ideas of Hyman Minsky, for example, would be very helpful to anybody seeking to understand the macroeconomic implications of liberalised finance.
Above all, however, the teaching of economics to undergraduates must focus on core ideas, essential questions and actual realities. Such a curriculum might not be the best way to produce candidates for PhD programmes. So be it. The study of economics at university must not be seen through such a narrow lens. Its purpose is to produce people with a broad economic enlightenment.
Leave the technicalities for later.
provide a course on the history of economic thought.
“We still want to teach students how to use economic models, but we also want to cover topics such as inequality, which were not really taught before,” she says.
Game theory — the mathematical modelling of interaction and decision making — is one topic that is introduced early on in the course. These are relatively new branches of economics that are typically taught later in existing curricula.
The students attending the Core lecture at UCL seem engaged, notwithstanding one tired undergraduate who appears to collapse in his chair when Prof Carlin starts discussing the
US Federal Reserve’s decision to offer emergency liquidity to systemically important banks at the height of the financial crisis.
As Prof Carlin rushes through the final slides of her lecture, there is a
sense the programme is perhaps a little too ambitious. In the last five minutes of a lecture that has already touched on the Great Depression, the global financial crisis and Great
Recession, she tucks in a few slides on the effect technological change will have on employment, a hotly debated topic among economists.
The softly spoken academic then shows a market report that has been automatically generated by a computer and, on that note, invites students to think carefully about the career path they choose.
Edward, an 18-year-old in the class, says: “I am very happy with the course, but sometimes I wish it went straight to the point. The narrative can be too wordy.”
Ultimately, exam results will give the best indication of whether the programme is too complex.
Some of the questions on the specimen paper, which include a discussion of the economic impact of Uber, the taxi-hailing app, look interesting and relevant to the “real world”. But for the students, what matters in the end is whether they pass or fail.
If the last interactive quiz of the lecture is anything to go by, there is still some way to go. Only 8 per cent of the class choose the correct option.
“Here you have some work to do,”
Prof Carlin says.
Alan Beattie page 11
ALIYA RAM
A new social media platform is seeking to “democratise the gated art world”, an industry that is traditionally the preserve of the wealthy and well-connected.
Art world insiders are saying new sites such as Tondo are shaking up old relationships by making links between investors and artists in different countries.
The Frieze Art Fair, which attracts tens of thousands of visitors to its events in New York and London each year, said
Instagram had helped it reach new audiences by engaging users without
“broadcasting like with Facebook or
Twitter”. “If we’ve got 160,000 followers on Instagram, they are not all going to be from the art world, which means unlike with existing media channels, we’re not speaking to people we’ve spoken to before,” said Frieze.
Museums and galleries have been relatively slow to move into social media, in part because institutions want to avoid bombarding followers with posts.
“The art community has been slow to go online, but I am glad it finally has because this will lower the barriers of entry to the art world,” said Ayelet
Elstein, chief revenue officer for Tondo.
Tondo was founded in December 2014 by two former employees of Sotheby’s —
Saul Ingram, previously head of business development in Europe, and Sonya
Bekkerman, head of its Russian Art department. Both had careers with the auction house before leaving in 2013 to follow “opportunities that are still untapped by the mainstream”.
Instagram has helped The Frieze Art
Fair reach new audiences
Ms Bekkerman said Instagram showed her the “art world is dying to engage”.
Indeed, Instagram said the number of
“InstaMeets” — where users host events and take photographs together — is growing.
Tondo has attracted more than $1m in investment and 32,500 users from countries including the US, UK, Russia,
Israel and Spain.
“A lot of people are lured by art, but when they want to make an investment or just buy something, [magazine] editorials don’t tell them where to put their money,” said Ms Elstein.
Tondo does not either, but by encouraging artists and specialists from galleries, fairs and auction houses to post about their work, it hopes to make insider knowledge “egalitarian, democratic and accessible to everybody”.
Not everyone believes it can. “Tondo is just another way of flattening art and asking artists to create a brand instead of making work,” said one anonymous artist. “Of course, no one will come out and say this because artists all know each other.”
But Whitechapel Gallery, which has been among the first to engage with various digital platforms and calls itself
“the artists’ gallery for everyone”, says
Tondo offers an opportunity to tailor its message.
“Social media is one of the many ways we communicate our extensive programme . . . we joined Tondo in February and are excited to see how [it] continues to grow and develop over time,” said the gallery.
Pedro Font Alba and Bruce Irwin, who run Scan Arte, a network that promotes emerging Spanish artists internationally, have used Tondo to meet collaborators, including an art consultant who now advises the group on Colombian work.
“What is important to us is that the online and offline worlds are complementary, that what happens online facilitates what is happening offline,”
Mr Alba said. “Not only are we finding artists, but they are finding themselves by forming a web of connections.”
Mr Alba and Mr Irwin said it remains to be seen how Tondo will fuel that content when the platform grows.
“One of the best things now is [that]
Tondo is small — we know Ayelet’s posts
. . . I wonder how they can keep that community and not become just another social media giant.”