UK should learn from Australian pensions model, says Baker Tilly
GLOBAL - Lawmakers must learn from the setbacks suffered by Australia as it rolled out its own compulsory pension system, awarding policing duties for the payment of contributions to HMRC, the UK's tax office, Baker Tilly has said.
According to the chartered accountancy's head of pensions Ian Bell, guaranteeing employers pay the mandated contributions could pose a problem once small and medium-sized enterprises (SMEs) begin auto-enrolment.
Discussing the UK regulatory landscape, he questioned whether it were necessary to transfer responsibility for the regulation of contract-based pension funds from the Financial Services Authority to the Pensions Regulator, which oversees all trust-based funds.
He argued that provided both regulators were "singing from the same hymn sheet", they would be able to achieve the same overall outcome, even as separate entities.
Bell, however, raised concerns about other aspects of regulation under the incoming auto-enrolment regime, questioning whether there would be sufficient oversight for contribution payments and questioning if the current method of opting members in three years after their last opt out was practical.
"The operation of it will be a challenge, undoubtedly a huge challenge," he said of the current system, requiring employees to be enrolled on the third anniversary of their last opt out, rather than on predetermined dates across the entire workforce.
Bell referenced the problems suffered in Australia when the country rolled out compulsion for smaller employees, saying that the system suffered "bad press" as stories of contributions not being made on time emerged - leading to accusations that the system was failing.
"The only solution they found to it was to give the policing of it to their equivalent of the HMRC," he said, referencing the Australian Taxation Office.
"You are giving policing duties to people who are actually responsible for reviewing payroll and asking them to be making sure the right amount has been paid."
Bell expressed surprise at the government not having learned from the Australian approach and its shortcomings.
"There is a country that has been very successful," he said. "They had their teething problems, but it is now very successful and respected by everyone that is part of it."
He added: "I don't understand why we haven't gone down a similar road."