The UK retirement market has more in common with the US than Australia as both countries grapple with a lack of advisers, according to Lee Hollingworth, head of UK retirement at Franklin Templeton.
Speaking to FT Adviser, Hollingworth alongside Yaqub Ahmed, co-head of US retirement, discussed the evolution of retirement and pensions and what both countries could learn from each other.
Hollingworth said: “The actual needs in the US and the UK are pretty similar. You take away the jurisdictional nature of it, and there are some areas that are very particular to a country, but fundamentally, you've got people saving for retirement. So how do you enable that in the best way, and then convert those savings into retirement income? And whether it's US, UK, Australia, Canada, they all have quite similar structures as to how to go about it.
"The UK, certainly the government, has had a clear focus on Australia and looking at how the Australian model works, and we just adopt that. That's really good, and that's got a lot to say for it. It clearly is a very mature market, and they've done some very good things. But the largest market in the world is the US market, and when you start looking at it, it's got more in common with the UK than we have with Australia.
“Australia was almost like a clean piece of paper. They said 'We're going to enforce compulsory savings' and they had almost like a fresh field site. We, like the US, just don't have that.”
Ahmed discussed how the US market was mature but it was also changing very quickly and that was the part where the US could learn from the UK.
“Where we can learn are globally consistent themes around ageing demographics of retirement income, introducing private investments and access to advice. The best entry point is the workplace, where you can do that effectively. So those are in the master trusts which are newer to the US. That was passed through legislation a few years ago.
“Its very early days, but it's something that the industry is keeping a close eye on, because it could evolve very quickly. Where it's a single trust environment, where each company has their own plan, and the idea behind the pooled employer plan, or master trust, was to create economies of scale so smaller companies could join, because there's 30 per cent of private sector employees who do not have access to a private DC plan in the US. So it's this coverage gap that you're trying to solve,” he explained.
Access to advice
Hollingworth discussed how there is going to be a change going forward in terms of the amount of wealth people have amassed in retirement and how this would impact advisers' work.
He said: “In the UK, retirement income advice has been the preserve of IFAs. They're focusing on where the wealth is, and those who are looking to draw down their benefits have probably amassed a reasonable amount of savings. Now that's going to slightly change going forward.
