UK should not try to replicate Australian pensions model but learn from it

Speaking at the Pensions and Lifetime Savings Association’s (PLSA) annual conference in Liverpool this week, Paul Watson, former group executive at Hostplus, said that while the UK is putting Australia on a pedestal, it should look to learn from its mistakes and not look to replicate its pensions model.

He said that no jurisdiction has a “mortgage on good ideas or insights”, noting that the best thing that the Australian pensions system can do in terms of lending its experience is “not so much in what we did but help the UK avoid its mistakes”.

He said: “In hindsight, we can help because our systems are so overlapped and related in terms of improving and helping you sail through some of those challenges we have to deal with, and we’ve got some scar tissue from — that’s probably the best thing that we can probably do in terms of that sort of bilateral conversation.”

One lesson that People’s Partnership chief executive officer Patrick Heath-Lay highlighted was the Net Benefit project.

Net Benefit is the investment returns delivered to savers of Australian workplace pensions or super funds, after admin fees, investment fees and taxes have been taken out.

Heath-Lay said: “There’s a lot we can learn from Australia, particularly when it comes to highlighting value in the product. Net Benefit has been a huge success story and has contributed to the high expectations that Australian savers have of their pension funds.”

He stressed that in the UK, competition in the pensions market focuses too heavily on cost and non-investment proposition factors and this must change.

He said: “Our experience with member transfers is that the vast majority of people don’t consider investment returns or the impact of charges when transferring their pension.

“It’s vital that savers have a much better understanding of the real value offered by their pension provider – the return their pension is providing them – before considering factors like service and engagement.”

Heath-Lay highlighted that while a Value for Money framework is being developed for providers, a consumer-friendly version is expected.

“We believe a measure like Net Benefit could be a useful consideration. We’ve been working with partners in Australia to explore what this could look like and what would be needed to bring this to the UK,” he said. 

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