Sir Robert Menzies said in 1949, “The best people in this community are … those who by thrift and self-sacrifice, establish homes and bring up families and add to the national pool of savings, and hope someday to sit under their own vine and fig tree, owing nothing to anybody.”
Little did Menzies know then that some 43 years later all Australians would be made to add to the national pool by contributing a percentage of their wages.
It was a good idea at the time but sadly for the past 30 years, its execution has been poor.
The system has become too introspective, expensive, driven by culture wars and defensive about change.
There is no point in having a vast scheme which does not allow or encourage the bulk of Australians to become self-funded retirees.
Yet so many of us believe that super will deliver a self-funded retirement when it won’t.
I recently wrote a book highlighting the failures of Australia’s superannuation system.
Ideally, the book should have been called ‘Nest Egg’ but after my research, the title rapidly became ‘Bad Egg’.
It became very apparent that the super system is letting down the Australian worker and the Australian economy. One need not dip in too far to see why.
Here we are in 2020 and we are still stuck with the 1992 Superannuation Guarantee Act which Paul Keating continues to bask in.
It’s outdated, inefficient and beholden to vested interests, including big business and unions.
Not surprisingly, today’s superannuation scheme maintains its Labor-sponsored birth certificate.
Labor’s Mary Easson sat in the Parliament from March 1993 to March 1996. In her book on the history of super, she says: “The modern Australian superannuation system was developed from the creative foresight of its founders, principally those in the unions and the Labor Government.”
Former Labor Treasurer Chris Bowen has described super as a “long term Labor agenda”.
And then there’s this, from venerated Hawke era finance Minister Peter Walsh in his book ‘Confessions of a Failed Finance Minister’: “Consistent with its policy of putting the interests of those with jobs ahead of those without jobs, the ACTU was in favor of compulsory superannuation …[for lower-income workers] it will be a cost-ineffective investment … but are a pot of gold for those, including unions, who can get into super fund management.”
Management of the scheme was given to the unions and the financial institutions despite a recommendation from the 1976 Hancock Review into National Superannuation to establish a government default fund.
In other words, modern superannuation for the past 30 years has been a union project, and not surprisingly they were given the keys to what is essentially a closed shop.
The unions couldn’t wait to jump into bed with big business and create what is now a $3 trillion industry which costs the country more than it saves and is lining the pockets of the funds instead of enriching Australians.
COVID-19 has provided us with an opportunity to have a hard discussion on super.
It’s a great idea if it does what it’s supposed to do; reduce the cost of an ageing population and boost the quality of life of Australians in retirement. But it is failing.
Sixty-eight per cent of retirees will still take some form of pension — either part or full. It stays that way through until 2050.
Super needs a plan. I propose we set an objective, create a target of 50% of Australians to become self-funded, and we hold the industry accountable.
Choice is essential. It creates competitive tension which drives prices down.
Workers should not be forcibly locked into an underperforming fund when they can choose a better one.
Fees and costs must come down. How can it be that we pay $32 billion each year for super which is more than we spend on our power bills?
We need a new system with choice and simplicity at its heart.
This approach would significantly reduce costs and duplication and allow Australians access to a high-quality scheme.
A scheme that just might allow you to sit under a vine or fig tree and not owe anything to anybody.
Andrew Bragg is a Liberal Senator for New South Wales and author of “Bad Egg – How to Fix Super” (Connor Court).
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