Australian superannuation is about unions rather than our retirement

Australian superannuation is about unions rather than our retirement, by Adam Creighton.

A total of $30 billion a year in fees — a figure from the Produc­tivity Commission that excludes the $2bn a year in wasted insur­ance premiums for duplicate polic­ies — gives you a big payroll. No fewer than 14 superannuation ­industry and professional associations, and eight financial planning and professional associations, depend on super. …

Super has become the longest gravy train. Its origins have little to do with retirement saving. Super emerged in the 1980s to a provide wage increase without stoking inflation. It was a macro-economic sleight of hand born of the Keynesian economics of the time.

It also was a deliberate subsidy to financial services, long before the financial crisis demonstrated some of the downsides of an artificially bloated finance sector …

The justification for super today — to ensure people provide for their own retirement — was welded on later. Yet wheeling out the coercive power of the state because some people are spendthrift should be self-evidently ridiculous. It hasn’t even worked, given the value of the tax concessions far outweighs the reduction in Age Pension outlays. ….

In a 1997 referendum more than 90 per cent of New Zealanders voted against the introduction of an Australian-style compulsory super. We never had a chance to vote here.

Indeed, New Zealand offers the template for what Australia should aim for: a universal, flat rate Age Pension paid to all regardless of income, and optional super. The simplicity would be as breathtaking as the benefits. The whole means-testing apparatus could be swept away; we could forget about deeming rates. Pensioners, the fastest growing cohort of the population, would have greater incentive to work. There’d be no more need for retirees to engineer their affairs to “keep the pension”.

So make it voluntary. Nearly everyone under 50 would rather $100 cash than $1,000 in super.