Unlike UK retirement savings, the Australian superannuation system includes automatic consolidation of savings pot. Most people do not have the small pot problem that besets many of us in the UK. So I was surprised that there is a heated debate over the availability of pensions purchased under the Australian’s Retirement Income Covenant.

This is taken from Darcy Song’s article

At the heart of Australia’s unique and ever-contentious superannuation system is a grand bargain. Workers must by law forfeit their own wages in the present to prepare for the future, but in exchange receive favourable tax treatment.

That was the historic deal struck in 1985 by the Labor government with unions and business. But 40 years later it is potentially being undermined by a widespread but under-the-radar practice by superannuation funds.

The article talks of Australia but the same dynamics are at work in the UK.

Most people in the UK , struggle with getting money out of their pensions , no matter how big their pot or experienced they are. I am a case in point.

I am currently looking to self-manage my retirement affairs. I am two weeks into the process having contacted my provider, Legal And General. Right now I am trying to locate a printer to print off the 8 page application form and the 3 page risk questionnaire both of which have to be signed with a wet signature. I also have a 9 page quotation to tell me what a quarter of my pot is (though it will not tell me what I get unless my fund remains at the same level as today).

My other account with Nest will not let me transfer out my tax free cash independently of my entire pot. This is a common enough restriction with occupational schemes though one that will come as a surprise to many savers for whom taking the tax-free cash independently of the rest of the pot. Nest says you need to keep £2,000 in your Nest account to keep your account open.

In short, while I can make contributions easily, getting my money back is hard. This is not quite the same complaint as those of Aleks and Darcy (above) , but it points to what appears to be a global problem, ordinary people who do not have expert assistance , struggle to get money back from their pension pots.

My problems are simply to taking my tax-free cash! So what about pensions and annuities?

Retirement Line can provide annuity quotations for pension funds as low as £1,000. This means that annuity providers feel they can, under the consumer duty , provide value for money for an annual payment of less than £100.

This suggests that unless the fixed costs of the Australian pension system are considerably higher than the UK, we are considerably braver than those down under.

Ironically, the normal underwriting rules for small post in accumulation are reversed on annuity purchase. Those with small pots are sadly those who are least likely to take advantage of improved longevity, the poor die sooner than the rich.

There are also considerations around exceptional cash calls. If you are swapping out the liquidity of a personal pension pot for a lifetime income and leaving yourself with no free capital, you risk indebtedness when meeting major bills on motor and household bills

We are currently considering a minimum purchase for the pension to be offered by Pension SuperHaven. Should we match the insurers?

My gut feeling is that we should as there appears to be considerable demand to pay voluntary national insurance to  purchase state pension credits.

Arun Muralidhar reckons his SeLFIES can be purchased for as little as £5.

Maybe it’s time for a rethink about how we buy pensions and lifetime income products.