That is for the Pensions Commission next year, and the Government in its turn. But I do want to show that risk is at the heart of the issue. 2. The nature of risk  “In this world nothing can be said to be certain, except death and taxes” wrote Benjamin Franklin in 1789. Great man though Franklin was, it is clear that there is indeed substantial uncertainty both about death, or at least its timing, and the contributions or taxes required to pay for our pensions. When thinking of how much to save for retirement, there are three main risks to consider. First, how much will we be earning in the future? Second, what will be the rate of return on our savings? Third, how long are we likely to live? Tonight I shall focus exclusively on longevity risk - the uncertainty about how long we shall live - in order to focus on my two propositions about probabilistic thinking and public policy.4 None of us know how long we shall live. But we can assess our chances by looking at the experience of others. A key distinction is between individual and collective risk. Chart 1 plots the observed mortality rates at different ages for women in England and Wales in 2002, the most recent year for which detailed data are available. (A similar story can be told for men). The most common age of death for women was 87, but many died at very different ages. Mortality among individuals varies greatly - individual risk.
On the one hand, it allows diverse experiences, arguments and points of views being brought to the table. On the other hand, there is a shared responsibility for the common decisions taken. It is not a single individual but the entire institution which is behind these decisions. To my mind both aspects are crucial for a strong and independent central bank. For these reasons accountability and transparency are both more easily and more appropriately implemented in the relationship between the public and the central bank as an institution, rather than primarily with respect to individual central bankers. In this relationship the public acts as a principal who delegates the task of monetary policy to the central bank as its agent. The act of delegation can be one-off, of a constitutional nature, or it can be periodically renewed. In both cases it is crucial that the central bank can be held accountable for its performance by the public. This can be achieved in different - more or less formal - ways. Even if no explicit contractual elements and specific sanctions are incorporated in this relationship the delegation of decision-making authority to an independent central bank establishes a kind of quasi-contractual relationship. The delegation of authority represents an act of trust on the part of the public and it represents a promise and an obligation on the part of the central bank to fulfil its mandate. So, should we - should you - have faith in central banks? The answer is yes and no.