The Australian pensions system has had a clear influence on the UK. Indeed, the latest proposals for pot for life reference Australia’s recent ‘stapling reforms’ as one of its inspirations.
To get a real understanding of the commonalities and the differences, in this podcast we talk to Andrea Piaia director of Retirement at WTW Australia and Gemma Burrows director of retirement at WTW UK.
Andrea suggests that it is relatively early to see a big impact from stapling but previous reforms encouraging comparisons and choice have seen the system move from one where 80 or 90 per cent were in the employer default fund to one where it is now around 50 per cent, but that took a lot of years.
She says that applying stapling to the UK is potentially a good idea but adds that you have to remember the two systems have very different histories not least that the UK does not have a compulsory superannuation guarantee payment so that likely creates a different level of engagement.
Gemma says the question for the UK is whether stapling gives better member outcomes, in a system that currently plays heavily on inertia. By contrast stapling will rely on an individual engaging with their pension.
“We are creating a risk the individuals end up in an unsuitable product while employers do hold providers to account, she adds.
She suggests that providers will have to market to consumers and that will not be cheap and asks could that investment be better spent on member outcomes.
Andrea also says that the Australian experience has highlighted some risks including being stapled to your first fund, when a more appropriate fund is available.
“To just put stapling in without thinking about these risks may be challenging We have 20 years of masses of legislation framed with choice and stapling involved,” she says.
One thing that a series of reforms has brought is consolidation. In 2004, she says Australia had 1500 but they now have around 117 and the number is still reducing. How many funds are enough, she asks.