Policy makers in the UK should look very closely at the success of the Net Benefit measurement used by the Australian pensions industry, the Chief Executive of People’s Partnership1, provider of The People’s Pension, has said today.
Speaking on stage at the Pension and Lifetime Savings Association’s (PLSA) Annual Conference in Liverpool, Patrick Heath-Lay, said lessons should be learned from Australia before consumer-facing value for money metrics are implemented.
Net Benefit is the investment returns delivered to savers of Australian workplace pensions or super funds, after admin fees, investment fees and taxes have been taken out.
Mr Heath-Lay was speaking at a session called Lessons From Down Under, where he was joined on stage by Australian pensions expert Paul Watson, formerly an Executive at the super fund Hostplus and the chair of the debate, Gregg McClymont, a member of the PLSA Board and former shadow pensions minister.
On the issue, Mr Heath-Lay comments:
“There’s a lot we can learn from Australia, particularly when it comes to highlighting value in the product. Net Benefit has been a huge success story and has contributed to the high expectations that Australian savers have of their pension funds. In the UK, competition in the pensions market focuses too heavily on cost and non-investment proposition factors and this must change.
“Our experience with members transfers is the vast majority of people don’t consider investment returns or the impact of charges when transferring their pension. It’s vital that savers have a much better understanding of the real value offered by their pension provider – the return their pension is providing them – before considering factors like service and engagement.
“While a VFM framework is being developed for providers, a consumer-friendly version is expected, and we believe a measure like Net Benefit could be a useful consideration. We’ve been working with partners in Australia to explore what this could look like and what would be needed to bring this in in the UK.”
Mr Heath-Lay also revealed People’s Partnership is looking to develop formal relationships in Australia so it can better understand how value for money has been implemented into that market and develop so it can apply these principles to help improve The People’s Pension’s offering. He also made a call to other UK providers to join forces with People’s Partnership to develop a condensed set of VfM metrics for the industry.
Mr Watson added: “In Australia, value for money has become a legal duty for trustees to act always in the members’ best financial interest.
“Many in the Australian super system see Net benefit return as the most effective KPI for assessing value for money – it captures the actual financial outcomes delivered to members after or all fees, costs, and taxes, providing a clear and comprehensive measure of how well a pension fund is growing members’ savings over time.”
ENDS
Notes to editors:
People’s Partnership provides The People’s Pension, one of the largest independent master trusts in the UK, serving more than six million pension savers across the UK and manages £30bn in assets. As a business without shareholders, it reinvests its profits with the aim to help customers and achieve better financial outcomes for everyone.