Government officials and ministers are actively meeting Australian politicians and consultants to explore ways of reforming the UK’s pension system, using Australia as inspiration.
Nick Sherry, a former Australian Superannuation minister, has been holding discussions with the DWP in recent months, while a former Australian civil servant has also been helping the department.
Sherry said: “In my conversation with the DWP, they’ve been interested to understand the evolution of the Australian [system] and the possible solutions for the UK. DWP are very interested in understanding why Australia has worked the way [it has].
Other consultants, with experience of Australian Superannuation, have been speaking to ministers and officials in an attempt to draw lessons from the Australian experience.
One said: "High level discussions on Australia are continuing with experts in the UK and Australia; transfer of information and advice is taking place. There’s clear consultation going on with regards to Australia and soundings being taken from Australian experts.”
Chancellor Jeremy Hunt has in recent speeches about UK pensions cited Australia as an example to look to when considering Uk pension reform.
In the Budget earlier this month he said: “I remain concerned that other markets such as Australia generate better returns for pension savers with more effective investment strategies and more investment in high quality domestic growth stocks.”
DWP and Treasury divide
FT Adviser understands, however, there are divisions between the DWP and HM Treasury about the use of the Australian model as an example.
FT Adviser understands the DWP prefers a more exploratory approach, and that the assessment is still to consider the impact, and the pros and cons, of adopting the lifetime provider model.
Late last year, Hunt revealed in the Autumn Statement a consultation on the lifetime provider model, as an option for reforming the workplace pension system
The concept would involve a new employee choosing where to pay their and their employers’ pension contributions, with the expectation that it would be to their existing pension pot.
This is similar to the concept of ‘stapling’ in Australia, where contributions are compulsory, and where the system is designed so that employers are most likely to pay into a new employee’s existing pension fund.
The lifetime provider concept in the UK as set out in the consultation last year has been met with much opposition since launch.
Many in the pensions industry are concerned that it would break the link between the employee and employer with regards to their pension; that the UK pension landscape is much more fragmented, so it would be difficult to implement; and that the UK consumer is ill-equipped to make the right choices for their pension.
Nonetheless, many executives in the pension industry have been taking trips to Australia, on ‘fact-finding” missions, to plan for any future change and consider the opportunities.
The DWP said that a lifetime provider model could reduce barriers to engagement and make it easier to understand and plan for retirement.
FT Adviser investigation
FT Adviser's features editor Melanie Tringham has carried out an investigation looking at the future of defined contribution pensions, such as how the pot for life reform could work and why urgent reform on pensions is needed.
She has also taken a deep dive into how investing in illiquids could help pension savers and what the Australia superfund structure can teach UK schemes.
More can be read on our investigation here.
