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Retirement Income Insufficient from Superannuation Plans

In 1909 the Commonwealth created a Commonwealth retirement plan by replacing the existing plans that each of the state governments had in place. This plan served Australian’s well until the 1980’s and if it was not for the placing of the earnings into consolidated revenue and the insatiable desires of expenditure of governments without due regard to the commitments that were historically made this plan would be serving Australian’s well today. Paul Keating introduce the compulsory Superannuation plan because the insatiable spending plans of the Government he served as treasurer had depleted all reserves so that the pension was in grave doubt of being able to continue. I must add that the retired members of the Federal Parliament were still getting their retirement benefits because they were separately held in an earning account of the government – as the pensions were once held and should have still be so held.

At the time of the new plan I spoke and wrote of some of the real problems as I saw them at the time and those concerns included: 

  • Low income earners will not generate sufficient funds for a long retirement even when the contribution rises to 9% of their income.
  • Those who move from job to job and are casually employed will generate a pittance of funds before their retirement.
  • Those who move from job to job may not be able to use the same superannuation fund as the employer had the choice of the fund at that time – there has been some recent changes in this area.
  • The employee has no record of the money being deposited in the superannuation fund as they are only made aware of the amount that should be deposited on their behalf.
  • There was no capacity to compel a business to deposit the money in to the fund 
  • Low and medium income earners would not be able to afford to live beyond 15 to 20 years after retirement if they had successfully been employed and were in good health at retirement – this would become a real issue for a future Government. 

The replies I received claimed my concerns were ill-founded and that all was carefully examined and researched so the government was certain that the plan was sufficiently well funded for all retirees. I was surprised to read Paul Keating comments in the Sydney Morning Herald where he stated that there needed to be a government insurance for the over 80 to 90 year old retirees as they were running out of money to supply essential items.

Keating calls for super backup plan – Sydney Morning Herald, 10_24_2018

Very few politicians will admit their errors and while Mr Paul Keating is not admitting his mistake as a mistake he is showing that the plan he research and examined in detail did require retirees to die before they reach the 80 year old mark. Not ever good enough!!!

Is there a good plan to fix this problem?

The simple answer is yes! The plan devised in the beginning of the Commonwealth Pension plan was a good one and very balanced in so many ways. The failure of this plan was a failure of political honesty and integrity to deliver retirement income to all Australians. As governments had access to the pension account when they had a budget shortfall for any manner of projects they would take from this account and never pay it back. This depleted the funds so that pensions were essentially paid from consolidated revenue and as such were unsustainable as they became.

The plan is to recreate the old plan but protect the funds from pilfering for other purposes by two important things: 

  • The account protected by the constitution so therefore a constitutional amendment would be necessary to established protected precise purpose accounts.
  • The Auditor General have greater powers under the constitutions to see the account is administered correctly, so this would also require a constitutional amendment to establish this power for the Auditor General.  

The current superannuation plan has many issues and as has been discovered via the Royal Commission in to the financial sector. The level of corruption shown via the inquiry was to many unbelievable. The charging of fees to the dead, the charging of fees for no service at all, the unnecessary review of an account to attract more charges, the commissions being paid to staff for generating charges against accounts, and so many more unbelievable things just to keep the earning with in the financial institution. With all this the earning of these superannuation funds are now more unreliable than before. The plans of the regulator of fining the businesses and not the corrupt management and the corrupt staff has not assisted in the cleaning up of the industry, as there is no huge penalty of being corrupt laid at the feet of the personnel of the business. This is an appalling set of decisions and behaviour of Government and the regulator and will not deliver a trustworthy financial sector for the long term.     

The current signs of the market are not good at all as these links below will  show:

‘Blood on the floor’_ $50 billion wiped off market – Sydney Morning Herald, 10_26_2018 

ASIC’s failure to enforce the law let the sector off much too lightly – The Australian, 9_29_2018

Big four are going to be buried in compliance – The Australian, 9_29_2018

Bank charges smash nest eggs – The Australian, 10_27_2018

Reforms must strengthen, not crush banking sector – The Australian, 9_29_2018

PM blasts ALP over ‘offensive’ banks response – The Australian, 10_27_2018

Super fund assets at ‘tipping point’ says NAB’s Mike Baird – Sydney Morning Herald, 10_24_2018

 

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