PLSA AC 21: UK can learn 'key lessons’ from Australian small pots work

There are three ‘key lessons’ that the UK can learn from Australia in tackling the issue of high numbers small, deferred pension pots, according to Association of Superannuation Funds of Australia chief executive officer, Martin Fahy.

Addressing delegates at the Pensions and Lifetime Savings Association (PLSA) Annual Conference 2021, Fahy noted that recent changes to the Australian pension system had led to a “significant” reduction in small pots, which were a feature of the system “for decades”.

He detailed the three key lessons as: A strong preservation of benefits, reducing multiple accounts through consolidation, and transparency in fees.

“Recent changes have led to a significant reduction in the number of multiple accounts from 26 million accounts to 22 million accounts,” he commented.

“The government has recently capped fees on small balances and has placed a significant focus on efficiency. The new ‘Your Future, Your Super’ text clearly encourages funds to keep fees down.”

Also speaking at the session was Mercer wealth business leader, Benoit Hudon, who took at look at the UK’s standing in the ranking of global pension systems.

He described ‘key features’ that the UK system needed to address in order to improve its position in a pension sense on the global scale, including the restoration of the requirement for savers to take part of their retirement savings as an income stream, raising the minimum pension for low-income pensioners, and further increasing the coverage of employees and the self-employed into workplace pension schemes.

Increasing workplace pension contribution levels, and raising the level of household savings and reducing the level of household debt were also cited as ways of improving the UK pension system’s global standing.

“Giving access to different investment options, there is an opportunity here to get people interested in pensions," he added.

“I think we are taking some of the right steps to have access to these alternative asset classes.”

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