In the next podcast in this small pots/pot for life series, we look at some of the world’s pension systems that could influence the UK. We touch on Australia, New Zealand, Chile and Mexico all countries name checked in the call for evidence and, as we hear, some with more relevance than others.
We also look at other potentially relevant countries in the company of Aon chief commercial officer and head of Nordics Colin Haines and Aon partner John Foster.
Our guests bring some experience of working elsewhere and indeed of their collated research from Aon offices across the world while bringing it back to the UK experience.
Haines notes that in Australia stapling has put extra burdens on employers so he says the jury is still out on that system; the new government is considering further changes as a result.
Haines says New Zealand’s system with KiwiSaver is seeing employers begin to disengage.
Foster notes that Australia has far fewer providers but much better infrastructure. New Zealand has member choice which is almost retail.
Intriguingly, Mexico and Chile have put in place new state social security systems to move away from the defined benefit state system. Both have had problems – Mexico with duplicate records, Chile with investment returns and low contribution rates. Neither really compares with the UK.
Haines says in many ways it may be more useful to look at the US with lots of small pots and a new system of auto-portability and a retirement clearing house, though participation is low with fiduciary concerns. Again, the jury is still out.
What of other countries of relevance. He cites Sweden, Denmark and the Netherlands which have no small pot problem because of the prevalence of sector plans.
But that needs employers and trade unions to work together. He says Switzerland is the best comparison as it is quite like the UK market. There is no small pot problem because when you leave an employer you transfer to your new employer or to a central plan for the self-employed.< He says Norway has had pot follows member since 2021 and in 95% past pots are moving to their new employer this time using default. “You have to opt out to stop it,” he says. Foster says we should be looking overseas – the consolidation of small pots does seem to be working around the world in various places, but it needs to be given time to succeed in the UK. “Let’s see how consolidation rolls out.” He does add that the success of inertia is ‘writ large’ in the UK.