If you think that everything in the Australian DC pension system is a bed of roses, read this description of how their Super pensions should work and then read Jim Hennington’s linked in post on how they are failing to live up to their promise.
An Australian actuary writes…
In the UK, we have a similar issue, we have built DC savings schemes which we have sold “half-built” as workplace pensions.
The problem now is that the conversion of the semi-completed structure to fully built is proving difficult. Understandably, taking longevity and market risk on a pot is not something employers want their trustees to do. Where the employers have outsourced the problem to master trusts, the master trusts aren’t much keener.
CDC is supposed to be a relatively painless way to do all this but here the risks are not transferred to a third party but shared within the pool. This view of mutual risk-pooling feels good when you are in the stately splendour of the RSA’s clubhouse but it doesn’t wash with the master trusts. It just isn’t happening.
To complete the building and make is serviceable for pensioners, we need an extreme effort of will by experienced risk-takers, people who are prepared to take risk and manage it.
It is critical right now , that organisations who have staff facing the “nastiest hardest problem in finance” , consider the work that I and my colleagues are doing to create meaningful choice that uses the occupational pension framework to pay people certain pensions again.
It is not right that we sell people half completed building or pensions, We should be selling a “full service” pension offering a whole of life experience. Innovation is afoot, let’s listen and adopt.