Australia’s $4 trillion superannuation industry is going through a tough reckoning.
Its governance scandals are squarely in the sights of the nation’s financial and corporate regulators, which have both warned the sector to clean up its act and take seriously its obligations to safeguard the retirement savings of workers. It has the drawn the ire of a frustrated public who have increasingly been complaining about funds’ sub-par customer service.
London Lord Mayor Alastair King is in Australia to learn more about the $4 trillion super sector. Credit: Justin McManus
Despite its issues, Australia’s compulsory superannuation system is still hailed as a poster child for the defined benefit pension scheme and has again caught the attention of the United Kingdom, which is in the midst of a major superannuation reform.
London Lord Mayor Alastair King, also the UK’s international ambassador for financial services, is in Australia seeking to woo two-way trade between the countries and learn from Australia’s much-lauded superannuation system.
“We are going through a substantial revamp of our pension system in the United Kingdom … we’re just in the foothills of [it],” said King from the British consulate in Melbourne last week. “There’s also a great willingness to collaborate.”
King met with AustralianSuper, HESTA and Australia’s sovereign wealth fund Future Fund and says the biggest lesson he will take back to the United Kingdom will be the number of funds available to consumers.
While Australia has 14 (major) funds that the vast majority of the country’s 14.5 million workers squirrel away their retirement savings into, the UK has 21,000 for its 34 million employees.
“Imagine the duplication of fees,” King said. “The people we have seen from the super funds in the last couple of days have been really bright, impressive sort of individuals.”
“We run our pension funds through a series of trustees who are very bright and excellent people, but they’re not necessarily pure investment professionals. I just think, given the essential nature of pensions, some of that consolidation must be a process that the United Kingdom should adopt,” he says.
