Britain’s savers need to be better educated so their retirement outcomes can mirror the success of the Australian model, a senior Australian commissioner has said.
Geoffrey Conaghan, agent-general for the state of Victoria in the UK, said the financial services sector is “booming” in Victoria, not only because of a strong economy but also because people are engaged with their pensions.
He said the UK has held up the Australian model of compulsory pension savings in order to create the auto-enrolment regime, and said this would be a strong step in the right direction.
He added: “If the UK government asked me for advice, I would say, ‘Pick the best parts of the Australian model that work in a UK context’. But it is not a straight lift: for example, we do not have inheritance tax, but we pay higher taxes in our working lives.
“But before simply adopting another system that has worked elsewhere, any government should have a 25- to 30-year vision. No state pension is guaranteed – that’s what we told our people. The UK needs to make this message clear.”
Mr Conaghan said the impetus behind the Australian changes came during the 1980s, when actuaries told the government there would be a population bubble, with fewer taxpayers, more pensioners and a large pension gap.
He said: “This prompted policy discussion around creating a superannuation system that would allow our pensioners to have an above-subsistence income – privately funded – without them having to rely on the state.
“We just had to get on with it, and it has created a dynamic system for providers of investments and for pensioners.”
Mr Conaghan commended the work of the trade unions in helping people through compulsion. He said unions have been offering free courses for their members to educate them about pensions.
He said: “The UK is always talking about a fair pension. What does a fair pension look like, however? You have to turn the anxiety corner and just define a path foward. Educate people from the start. Help women to get pensions equality. Educate the workforce and help them to make the most of it.”
He added that, in schools, typical maths exams will include questions about compound interest, using the example of pension funds.
And a new report from Saïd Business School suggests early education is effective: it says 84 per cent of young people in Australia think they can get a pension akin to that of their parents.
Adviser view
Nigel Green, founder and chief executive of international advisory firm deVere Group, said: “The UK, among other countries, could learn important lessons from Australia, where there seems to be definite progress in revitalising the savings culture. What is particularly striking is that Australia’s burgeoning appetite for savings comes after it liberalised pensions. The move didn’t trigger significant numbers of people to withdraw their money; in fact, it appears it made many more likely to save, clear debts or invest. It will be interesting to see if people in the UK start to save more once restrictions to pensions access are scrapped next April. I doubt they will, as there first needs to be a seismic cultural shift in attitudes towards savings in Britain.”
