Britain is studying Australia’s superannuation funds as it seeks to learn lessons from the success of the A$4.1 trillion ($2.6 trillion) sector, said the Lord Mayor of London’s main financial district.
The scale of Australia’s biggest supers was impressive after “remarkable” reforms in 1991 that mandated employers to contribute to retirement savings, and holds lessons for the U.K., said Alastair King, Lord Mayor of the City of London. Australia’s money pool has grown by almost 500% over the last two decades, and is projected to become the second largest global retirement market by 2030, according to research by Thinking Ahead Institute.
“I’m very impressed with what Australia has done,” King said in an interview in Melbourne. “It’s not an utterly perfect system, no system is, but there are ways in which we can learn from Australia.”
King is visiting Brisbane, Melbourne and Sydney this week to promote U.K. investment opportunities, and said he was also here to learn about Australia’s big superannuation funds.
Chancellor of the Exchequer Rachel Reeves said last year the UK will introduce legislation to pool £1.3 trillion ($1.6 trillion) of pension savings into a series of “megafunds.” The Labour government is trying to deliver on its pledge to boost private investment and economic growth.
“There are 21,000 different pension schemes in the U.K.,” King said. “Imagine the duplication of fees, imagine the inefficiencies and the frictions.”
King said U.K. pension funds were keen to work with Australian supers on co-investments as London’s financial and professional sector repositions after Brexit. “We’ve got life sciences and we’ve got renewables,” King said of the opportunities he saw in addition to infrastructure and insurance. “Each of those are long-term investments” with reliable cash flows, he said.
AustralianSuper, Melbourne, and Australian Retirement Trust, Brisbane, both currently manage more than A$330 billion each. A Mercer report predicts industry assets topping A$13.6 trillion by 2048. It sees a dozen funds controlling more than A$100 billion each by 2028, driven by mergers, organic growth and investment performance.
Some of Australia’s largest super funds have already opened overseas offices as they look to grow their presence beyond global markets. Around half of all investments are offshore.
AustralianSuper has an office in London, while Australian Retirement Trust and Aware Super have also set up bases in the city.
Last week, U.K. government-backed pension fund Nest announced a 10% stake in the parent of Australian investment manager IFM Investors, becoming its first overseas shareholder as it pushes deeper into private markets investments.
