Nick Sherry in Government
Nick Sherry, the Tasmanian Devil of Australian pensions is back in the UK and – courtesy of David Harris – finds his way to Darren and Nico’s VFM podcast.
Pot for life?
This post is picking up on a couple of his comments and takes its lead from comments on linked in from David Harris himself
Pot for Life as known in Australia partly as choice of fund came into being on 1 July 2005. The rule for the policy was consumer benefits, efficiency and a need to consolidate the market. Scale for illiquid investments. This year TOR has discussed with its clients how the DWP and HMT have been looking for a panacea for infrastructure investment and the need to mitigate the plethora of small accounts.
Unintended consequences – employers become payment routing mechanisms, EBC role eroded, illiquid assets eventually gets scale, choice exercised little by members, trustees placed under further pressure to be more intensely regulated. The employer provider nexus tends to be eroded further in favour of enhanced member engagement and patient capital. Default positions become central to profitability – workplace savings profitability placed under further pressure – scale game . Enhanced retirement income and sticky customer relations. Does Labour agree is key? Happy days ..
I had thought that Nick Sherry, being seminal to the development of Super, would be a fan of “pot for life”, but it turns out it has losers as well as winners and the TWUSuper of which he is now chair, is a loser. It turns out that the Supers that win from pot for life, are those who induct savers into the system , while those who lose, like the TWU scheme, are those who inherit savers who are on their second and subsequent jobs.
The UK, that does not set up master trusts on an industry basis, is less likely to suffer from “second mover disadvantage”, but it is clearly the case that pensions are sticky. If you join a failing master trust at 22 (or 18 if reform happens) , you may well be in the same scheme 50 years later.
Australia worked out, rather earlier in the cycle, that most people don’t consolidate their pots. In the UK we have so far failed to provide a dashboard, an efficient transfer mechanism , let alone the “stapling” of one pot to another, which is key to pot for life.
Listening to Nick Sherry , the interests of his scheme seemed rather more important than the interests of the members. I am not criticising Nick for putting his scheme first, but suggest that the vested interests of the funders and providers of trust and contract based workplace pensions will need to feel they will be equally treated by pot for life, for it to receive their co-operation. Their behaviour in co-operating over small pots, suggests that realpolitik prevails.
From Governor to governance
The task of Chairing a Super scheme is clearly one that Sherry relishes. He is now as much an enthusiast for his scheme as he has been for the Super system. It is clear that consolidation is a land-grab and Sherry relishes growing TWU’s empire by acquisition. To suppose that consolidation is an organic business based around VFM is naïve. The winners in this game are the hard nosed brutes who run the Aussie system. Let’s be clear about that in the UK too.
Sherry – the Governor
Politicians and civil servants should listen long and hard to what this man is saying and how he is saying it. Anyone who thinks that the workplace pension system will be run on anything but a commercial basis in future , needs a lesson in pension realpolitik from Nick Sherry.
Pots not pensions
The $6.4 bn in the TWUSuper is owned by 108,000 members and TWU is one of the founding schemes of the Australian workplace regime.
With mature pots and a relatively small membership, I had expected to hear the former Senator speak about the need to turn pots to pensions. I didn’t. This was not on the list of issues he considered value for money and I suspect it’s not as major issue an issue for the Chairs of Supers as the Australian Regulator would like.
The Realpolitik of pensions is that pots do the job – at least as far as the commercial interests of schemes are concerned.
I wonder if Nick Sherry would have seen the Retirement Income Covenant as rather more important if he had still been in Government , rather than in governance?
