Compulsory super detrimental: Research

Given the abysmal penetration and management of superannuation in the years before the Hawke/Keating overhaul (I did a national survey of private and corporate super for Personal Investment magazine back in May 1985), this has got to be one of the most stupid pieces of economic research on record.

The article is right about one thing "correlation does not equal causation" not only in this case but in so many other instances.

Cochrane's comment is correct in that prior to the Hawke/ Keating overhaul Superannuation was normally only available to permanent employees ( after a qualifying period) of Federal/ State & local government departments /instrumentalities &large /medium corporations.

Small employers were unlikely to provide super & in most industries short term / casual employees were not even considered.

Company funded benefits were subject to vesting scales that started after 5-10 years membership so that on termination a member might only get their own contributions back with a small amount of compound interest. The benefit could be paid out at any age, was not subject to tax until 1 July 1983 & was usually taken in cash. There was no system in place for direct transfer to another fund.

Today SGC contributions are fully vested from day one, subject to preservation & the accumulation can be readily transferred to another fund.

Award Super only started in 1987at 3% , the SGC at 3% in 1992 - only rising to 9% by 2002 & to 9.5% in 2013.Even if the 9.5% had been payable over the 22 years the accumulation of 2.09 times the average salary paid would not provide a pension to live on.

It must be remembered that that if the 9.5% was paid as wages it would be subject to tax & the employee would only receive 7.7% (19%tax), 6.0% (39%tax) & 5.2% (45%tax).

Compulsory super was meant to be the long-term answer to offset the ever-increasing cost of the Age Pension, but ongoing political interference is not allowing it to achieve that objective.