People aged 55 and over have had complete access to their pensions since the country introduced compulsory saving 20 years ago.
However, the system has its problems, with people blowing their pensions savings pre-retirement and even getting into debt knowing they’ll be able to pay it off come 55. A third of assets are withdrawn before people even reach state pension age, and a quarter of people have depleted their assets by the age of 70.
“In Australia, there’s a group of people who have spent their pensions, and are living on a state pension,” says Barnett Waddingham’s Damian Stancombe. “They are called the ‘grey nomads’.”
With Australia reviewing its approach to pensions freedoms, could a similar situation happen in the UK? The NAPF’s Jackie Wells believes the UK can learn from the experience down under. “At the end of the day people are people, so we might see some of the behaviours replicated in the UK,” she says. “It is evident that some people are running out of money before they die and there are lessons to be learned in helping people to manage their incomes.”
However, Australia and the UK do have very different pensions cultures, with people in the UK far more used to the concept of annuities. Towers Watson’s Will Aitken says that while Australian people have been “over-aggressively investing and running out of money”, the context in the UK is different and may save us from experiencing similar problems.
But that’s no reason to be complacent. Wells believes it’s “not unreasonable” to think some of the Australian experience, such as people drawing down from their pot only to find it has diminished more rapidly due to unfavourable market conditions, could be replicated in the UK.