Could we stomach Aussie rules in UK pensions?



Australian regulation is as hard as its sport. It’s coming to a regulator near you. Read this blog and ask yourself whether we want regulators’ that influence or whether Aussie rules , overstep the mark.

This is the Australian regulator’s dashboard of products available to Australian Citizens saving for their retirement.

These are my edited highlights of Apra’s promotion of its approach (you can read the full document here)

APRA is focused on driving a culture of continuous improvement, accountability, and transparency in the delivery of quality outcomes by RSE licensees to superannuation members.

Legislative reforms, including the annual performance test, have sharpened the focus on the financial nature of an RSE licensee’s duty to act in the best financial interests of beneficiaries.APRA uses the heatmap as a tool to hold RSE licensees to account for underperformance and help them identify areas for ongoing improvement. APRA expects RSE licensees to take both the annual performance test and heatmaps into account when assessing performance, to identify where outcomes for members need to be improved and how such improvements will be made.

What this boils down to , is that Apra is calling out self-select funds that aren’t delivering to member outcomes and doing so in a very public way.

You can see that the funds highlighted as failing are available under a variety of licences (think master trusts, workplace GPP and SIPP.

We don’t need to concern ourselves with the precise comparisons as we are not taking decisions on Australian funds (we being my UK readership). But we should be very interested in the inferences being drawn by Apra from its analysis.

From this analysis, Apra is telling its readership (from fund manager to consumer)

Choice investment options are more likely to have underperformed than MySuper products.

Closed Choice investment options have had particularly weak performance with 39% significantly below heatmap benchmarks, accounting for almost a quarter of the member benefits invested in these options.

This kind of analysis has become deeply unpopular in the UK over the past 40 years. The famous dictum “past performance is no guide to the future” has been rolled out whenever comparisons like these have been made. The dictum comes from and is endorsed by various UK regulators – and consistently.

So why should this concern us?

However you measure it, performance matters, it is what turns meagre contributions into massive pots, if you get good performance your need for top-up contributions diminishes, your prospects of a proper income in retirement increases. Performance is the measure of our retirement dreams and Apra is pointing out that your chances of getting good performance increases markedly when in certain arrangements over others.

And this approach concerns us because it is the direction of travel in UK regulation and if you are operating a UK fund or a UK funds platform and offering your wares as a workplace pension or an open SIPP or as a legacy pension, you should be thinking about your duty to your consumer and working out how you can best offer value for money.

Like it or not, your actions over the next few years are going to be compared with the outcomes you have achieved over the past few years. You may not like this, but this is the cold sobre reality.

Measuring by outcomes

I remember sitting in a roomful of IFAs , maybe 6 or 7 years ago and asking how they measured the outcomes of what they were doing against what they’d promised and their clients expected. One gnarled veteran looked at me and said “we gave up measuring outcomes long ago, if we measured ourselves in this way, most people in this room would be out of business”. There was some nervous laughter from those who knew I might blog about that comment, I did – we were in Chatham House – but it didn’t matter who said it, what matters is that the comment went unchallenged.

Apra are not just leading, they are laying a trail for others to follow. This report goes much further than Value Assessments, IGC and Trustee Chair Statements, it draws conclusions for people from the data it has aggregated and makes some pretty clear statements.

Do we want regulation like that? I suspect that most people in financial services don’t and most of their customers – were they to pay this mind – do.

We look at Australia and admire people’s interest in their retirement affairs and their engagement with the things they need to do to improve their prospects.

But when it comes to adopting the measures that have created this interest and engagement, these clear reports and recommendations, we are reluctant to follow the trail.

My friend , Jim Hennington , asks the question on linked in.

“Is a regulator right to be a Finfluencer?”

What do you think?

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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