“Both the UK and Australia share the same problem of how to build a sustainable pension system for an ageing population but the proposed solutions are looking very different,” said Stephen Lowe, group communications director at Just Retirement.
“The Australian government has announced it is to embed the objective of its private pension system – to provide income in retirement to subsidise or supplement its State pension – into a standalone Act of Parliament. From then on, that objective will become the anchor for all future pension policy.
“That clarity of objective is very different to here where the link between pensions and retirement income is being blurred by reforms allowing lump sum withdrawals from age 55 and the new Lifetime Isa.
“Ours is now a ‘multi tool’ approach that sees pensions as many things to many people. In Australia they have decided that providing a decent income in retirement is such a big job that it’s better to have a tool designed for that purpose.”
Stephen Lowe said that in some regards Australia and the UK are moving closer together, for example by capping tax concessions and focusing them on those who need most incentive to save for the long term.
“Even some of the language used by the Australian Treasurer Scott Morrison – enhancing ‘flexibility and choice’ for example – is the same as here which reflects the fact that work patterns in both Australia and the UK are changing and more responsibility is being placed on savers with less reliance on the State.
“In many ways Australia is years ahead of us in terms of auto-enrolment into pensions which means pension pots tend to be much bigger than here. Yet the Australian government is still worried people are missing out on income and are vulnerable to running out of money in old age.
“That is why it is taking such a big step to put retirement income at the centre of its private pension policy, promoting solutions to tackle longevity risk and reducing the extent pensions can be used for tax minimisation and estate planning purposes.”
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