A newly elected Liberal Senator wants to make superannuation voluntary for those earning less than $50,000 per annum.
Lashing the super industry in his first speech to the Senate, new Liberal Senator for New South Wales Andrew Bragg said compulsory super had "made the unions, banks and insurers richer than ever", and questioned the system's efficiency; in light of a population of around 25 million people amassing the world's fourth-largest private pension pool.
According to Bragg, the system is not working for Australians, and the legislated increases to the superannuation guarantee are beyond unnecessary.
"Certainly the case has not been made for ever bigger super," Bragg said.
"I would change direction. Super should be made voluntary for Australians earning under $50,000."
Bragg argues super has made home ownership "so much harder for lower income Australians" and pointed out all age groups have experienced lower levels of home ownership since the introduction of compulsory super in 1992.
The former Financial Services Council policy director said modelling he commissioned from research house Rice Warner shows the first year of voluntary super for low income workers would save the Government $1.8 billion.
Australians don't exceed the super tax rate of 15% until they earn more than $44,000 a year, a fact which Rainmaker executive director of research and compliance Alex Dunnin said ensures Bragg's comments - while controversial - were borne of a strong economic argument.
"People on lower incomes and with lower account balances pay high fees and pay higher tax rates inside super than outside of it," Dunnin noted.
To keep the super system intact, Bragg believes two questions must be answered: Will more super reduce future pension costs to government and how much better would retirement standards be with more super?
"The last Intergenerational Report showed around 80% of people would take a public pension in 2055. That is not good enough after 70 years of compulsory superannuation," he said.
"Unless the next edition favourably answers these questions, I would be inclined to make the whole scheme voluntary."
Superannuation balances generally need to exceed $31,000 before fees drop below 1%, leading Dunnin to warn the industry Bragg's comments foreshadowed significant change if the issues underpinning his arguments weren't addressed directly.
"The Senator's proposal is unlikely to result in policy change. But he has nevertheless issued a direct challenge to the superannuation industry. Most of its products are designed for older people on higher incomes with higher account balances," Dunnin said.
"Product designers need to address this. If they don't, Senator Bragg's comments in his speech could build momentum."