PLSA Local Groups Special Event – Pensions Industry Lessons from Down Under

The PLSA’s Local Groups, operating throughout the UK, are the place for members to build regional networks, share experiences, gain insight and enhance CPD hours.

On 24 November 2023 the PLSA London Regional Groups were privileged to be joined by the Australian superannuation fund, Aware Super, for a special event for PLSA members, kindly hosted by Schroders.

Despite it being a very cold Friday, we had a full house with around 50 PLSA members in attendance, all keen to learn more. The session included an overview of the Australian system and an interactive panel session where delegates put their questions to Aware Super’s Deanne Stewart, CEO, Sam Mostyn, Chair, and Damien Webb, Deputy CIO and Head of International.

Coincidentally, it was the same week that the Chancellor of the Exchequer, Jeremy Hunt, revealed in the Autumn Statement his proposal for the UK to move to a more individualised form of pension provision, known in the UK as the “lifetime provider model” or “pot for life” – and similar to the Australian model known as “stapling”.

The session provided an opportunity to delve deeper into these ideas, and members had plenty of questions on this hot and very timely topic. The discussions continued during the excellent lunch provided by Schroders.

About the Australian system

The Australian superannuation pensions system has grown from A$170 billion in 1992 to A$3.5 trillion today, and is projected to grow to A$6 trillion by 2030.

The objective behind superannuation is to ensure that not just the comfortable and wealthy get pensions, but that “all working Australians have dignity in retirement,” said Stewart.

There are five core elements to the Australian system: it’s mandated, predominately defined contribution (DC), preserved until retirement, allows for choice, and there is life insurance within the pension.

Key milestones and evolution

In 1992 the Superannuation Guarantee was introduced with a mandatory 3% contribution rate (or 4% for employers with an annual payroll above A$1 million), requiring employers to contribute into a super fund on their employees’ behalf; over the years, the contribution rate has been ratcheted up to 11%.

In 2021 the Australian government introduced Your Future, Your Super. One of the core elements is “stapling”, which Stewart likened to the Chancellor’s proposal for UK savers “having one pot for life”.

Also, the Australian Prudential Regulation Authority (APRA) is required to perform an annual performance test for superannuation products, intended to hold funds to account if they are underperforming by more than half a percent over a ten-year period.

APRA publishes an annual paper containing underperforming funds. If a fund underperforms two years in a row, it is not allowed to be open for new members.

Aware Super

Aware Super is Australia’s third-largest superannuation scheme, with more than 1.1 million members, and a projected growth trajectory from A$150 billion to A$250 billion in the next few years.

Originating in 1992 from the New South Wales State government’s shift from a defined benefit system, the fund – initially called First State Super – mainly serves key workers like teachers, nurses and emergency staff.

Super returns, super simple, super helpful

Aware Super’s primary objectives revolve around simplicity, member-first services, digital accessibility, and a robust tech infrastructure, emphasising a commitment to empowering members to plan and manage their retirement effectively.

The fund has received top ratings and awards from the industry’s leading rating agencies. “Part of that is really strong returns,” explained Stewart, “but part of it is also the way that we’re serving our members and digital interaction, and the advice that we’re providing.”

Over the last three years Aware Super has undertaken a digital transformation, making nearly all transactions (97%) digital and automated, providing members with immediate accessibility and reducing administrative costs by approximately 30%. It has also implemented stringent security measures to safeguard member assets, particularly during vulnerable points such as pension withdrawal phases.

The fund has also introduced a retirement planning tool, which has seen substantial member engagement, with 30,000 members using it within 12 weeks of launch, resulting in 10% taking action based on the advice received.

Watch the recording of the session.

Learn more about the PLSA’s Local Groups on the PLSA website.

Read the PLSA’s thoughts on the lifetime provider model in this issue or Viewpoint.