The UK should move from an employer chooses pension model to one where members select their own provider to boost engagement levels and help individuals take more responsibility for their own retirement.
This was one of the key recommendations made by Australian pension technology provider, The Link Group in its new report. It also said there was an urgent need to address the ‘multiple pots’ issue and move towards a single lifetime pot.
At the launch event of this report a poll among delegates present showed that seven out of 10 of them agreed that moving to a lifetime pot model in the UK would produce a step-change in engagement among individuals and result in better retirement outcomes.
This Link Group report – ‘Time to turn the pensions market upside down’ – examines the key differences between the Australian and UK system, and makes a number of recommendations on how a member-led savings culture could be encouraged in the UK.
Link Group general manager EMEA Richard Wilson said that for too many people in the UK pensions feel “more like a tax” with money disappearing from payslips for some unknown future. “Millions of workers have multiple legacy employer-led schemes over which they have limited say on investment decisions.
“Funds are left behind in fragmented pots, instead of travelling alongside them as a modern pensions passport,” he said.
Another key recommendation concerned the number of different pension bodies within the sector which has led to a fragmented industry with no single authority setting the strategic long-term direction of pensions. In contrast the Australian system has been underpinned by the Australian Superannuation Fund Association, which acts as a single member-led lobbying point.
Again a poll at the event indicated strong support for a more unified approach, with 76 per cent of delegates agreeing there should be an industrywide lobbying group with the aim of delivering long-term strategic leadership.
However, at a question and answer session at the launch event, representatives from the Department of Work & Pensions said they appreciated the diversity of opinions they received from a wide range of stakeholders.
Looking at ways to improve and reform the UK’s pension system, an overwhelming 94 per cent of delegates at the event agreed that there should be legislation now for auto-enrolment contributions to gradually increase in future.
There was also support for legislation to ensure that those retiring from workplace schemes are placed in prescribed decumulation options, rather risk the value destruction of their pensions by having to plan their own retirement strategies.
Wilson added: “It is clear that today Australians are retiring with larger funds spread across much fewer pots, those creating greater clarity and control. The Australian market is ahead of the UK in many respects but this gives the UK the opportunity to take some key learnings from Australia and where appropriate accelerate change to drive better outcomes, sooner. We believe our three recommendations are the key steps that will have the greatest long-term impact on member outcomes.”