As UK defined contribution pensions and Australia superannuation markets seek to improve member outcomes, they each have much to learn from the way the other addresses the common challenges of aging populations, longer lifespans and reduced savings. As a service provider in both countries, SS&C is uniquely positioned to offer a global perspective, identify best practices and share lessons learned from our experience.
One key difference between retirement plans in the UK and Australia is the responsibility of employers and employees to contribute. In Australia, employees are encouraged but not required to contribute to their retirement savings, and employers contribute 10% of the employee’s earnings (as of 2021) with a projected target increase to 12% by 2025. Meanwhile in the UK, employees must contribute 5% of their earnings, and employers must contribute 3%.
One way to inspire employees to contribute more is through progress illustrations. All members are required to be given a clear view of their pension potential upon retirement in UK. Such illustrations are not required in Australia, but providers are increasingly using projections to give members more visibility of their financial reality and encourage them to save. Some providers will take this a step further and incorporate guidance and tools that help members gain an understanding of what they might need at retirement, through basic fact finding and then showing them what they might need to save to achieve those goals.
A significant challenge to retirement planning in both countries is the issue of multiple pots, or the disjointed accounts that are created in different funds as members change employers throughout their professional lives. To address this challenge, Australia has enacted “stapling” legislation to allow members to stay in a prior employer’s fund until they choose otherwise, and SuperMatch, which enables members to use their Tax File Numbers to locate accounts. UK legislators might need to consider something akin to stapling as one way to help remedy the problem, although the incoming Pensions Dashboard Programme could be a step in the right direction once it is adopted across the entire market. In the UK, providers have to try and keep members at the end of their journey to secure their decumulation assets.
The efforts to address these challenges all come down to the same goal-improving member outcomes. Maximizing retirement accumulations is part of a larger effort to elevate pensions and get members to pay more attention to their financial situation by increasing their engagement with the subject. To successfully achieve this for all types of members, providers need to incorporate personalized financial wellness education that is targeted at the individual and their profile to motivate them to take a more active role in their retirement planning.
To learn more about the challenges facing the retirement planning industry and how Australia and the UK are using different strategies to address those challenges, download our whitepaper, Common Goals, Converging Paths: What the UK and Australian Retirement Systems Can Learn from Each Other.
SS&C Technologies Holdings Inc. published this content on 10 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 March 2022 08:02:02 UTC.