26th January 2014
The UK should adopt a system of compulsory pensions modelled on Australia, a fund manager has urged. With Australia day just past, Tony Stenning, head of UK Retail at fund manager BlackRock, has called upon Britain to look to our Australian cousins for the ideal savings scheme.
He says: “The Australians created a depoliticised, compulsory savings system which allows the nation to use their longevity to build a long-term nest egg.
“In the UK, we know people want more transparency. They want a simplified regime and greater understanding of investment products. They need to feel much more confident and knowledgeable about their financial future.”
The Australian system certainly has fans in high places.
The Telegraph last year noted a report from a global pension consultancy Mercer which suggested that the Australia had one of the world’s best pension systems in the world, though it came in behind Denmark and the Netherlands.
Under the Australian system, employees and employers must pay a total of 9% and it will be increasing 12% over the next few years. Membership is compulsory for both employees and employers.
The UK is in the midst of its own reform, but it is a form of ‘soft compulsion’ i.e. it is compulsory on employers to offer and contribute to a pension. But it is not compulsory for employees to contribute, though they must opt-out or be enrolled automatically.
Stenning is concerned about the culture of accumulating debt rather than saving and investing in the UK. He adds: “Today we have a culture that is more focused on accumulating debt than building savings. We need to shift this focus and create an impetus among consumers to invest and save for the long-term.
“The challenge for our savings and investments policy is that it is subject to the four/five year political cycle which creates uncertainty and fear for consumers in preparing for their long-term financial future. The evidence suggests that a depoliticised and simplified system can help people engage more.”
Stenning says that the National Employment Savings Trust, the Government backed pension scheme, which must take any workplace pension which other providers deem unprofitable, is certainly a positive step in the right direction.
However, he says more needs to be done by government, regulators and the industry to engage with consumers and educate them on their future long-term wealth requirements.