What did Compulsory Superannuation Replace?

All Hail Bob Hawke – the hero of retirement!

 

Or Is He?

 

Former Prime Minister
Bob Hawke

Bringing superannuation to all workers

Hawke introduced universal compulsory superannuation in his final budget in August 1991. This was brought into law during Paul Keating’s government in 1992.

When Hawke came to power in 1983, around half of Australian employees had superannuation. By 1989, around 65 per cent of workers were receiving 3 per cent of their wages as super.

History of retirement income in Australia (brief)

In 1909 the Commonwealth (Federal) Government created a retirement pension fund from a set % of income taxes that was collected by the state government s at the time to replace the different retirement taxes that the states had at that time as greater movement between the states made it difficult to manage for the states working alone. At the time the state governments collected income taxes at different rates as required by the each state.

The fund money was wisely invested and was earning stronger growths and was a strong guarantee for future pensions; however with the Labor plan in the 1972-1975 the fund was raided as they pushed through with the politics of envy and spent a significant amount on their free education plan and other huge cost plans. The election of the Labor Government of 1983 saw the pension fund depleted of most of its capital as the funds were used to fulfill the unfunded promises and so pensions were essentially paid out of current accounts and we were told that they were unable to be funded into the future and so a new plan was devised.

The original pension gave the same money to all retirees one they qualified for the pension and the new retirement plan now delivers different amounts of money to retirees – the amount of money to a retiree today is related to their relative income and the duration of their working life. This current plan is delivering a lower income in retirement for women who take time out of their working life to have babies and must be classified as sexist and anti motherhood! The lower income earners and the people who are unable to find full-time employment will have poor retirement outcomes. The people who become ill and unable to work due to an illness or an accident will also have a meager retirement income. 

In the late 1960’s through to the 1972 Federal election the great orator and political leader, Gough Whitlam, began the politics of envy as he attacked the wealthy for receiving a retirement pension, even though their contribution to the pension fund far out stripped what they would ever receive in return. The retirement income was based upon all paying a % of income through the income tax and on retirement all receiving an equal pension; because this learned statesman never checked the facts before attacking what appeared to be a problem. The original pension for all was funded by all! The current pension is funded because of a levy directly on each person’s income for their own exclusive benefit.

The Hawke retirement plan favoured the wealthy:

The Compulsory Superannuation plan favours the wealthy more than any other retirement plan that has had a place in the Australian context. In fact the politics of envy destroyed a universal retirement plan that needed support and the fund needed to be protected from raiding. The real problem for the politicians is that they do not understand the financial affairs that are essential for a functional government. Since the allocation of funds to the big bucket of consolidated revenue means that the link between why a tax is collected and the purpose for its expenditure is totally lost on them all.

Examples of how honest budgets should be set out:

For example the Medicare levy was to fund health insurance and yet the link between the levy connected and the health budget expenditure is never seen in any budget papers. As well the link between the levy for the National Disability Insurance and the budget for the expenditure of the NDIS is also never disclosed in the budget papers. The issue should be in all budget matters is we placed a levy to cover this expense collecting $xxxxxx and the cost supply that service was $yyyyyyy giving a shortfall/residual of $zzzzz and so a corrective action must be to either change the levy % or or to change the expenditure outcomes. But no we have statements we are incapable of analysing anything; we are told that we will have increases in expenditure or make savings in the area of concern but we are not told the truth about the actual expenditure and the money collected for that purpose.

 

Some historical notes:

Many in Government jobs and some major companies did have a superannuation plan as a part of their wage and salary package, but most in the general workforce did not have such a plan for their retirement. The pension was payable to all of retirement age at that time. It seems to me that the public service may have been so used to see that the vast majority of the people in Canberra (where the government and its departments employ most of the residents) were receiving a superannuation  package, as they had little to do with workers out side of the national capital. Bob Hawke only dealt with the big union leaders during his union leadership days and so possibly knew little of the plight of the non unionised workforce and the casual employees. So sort to extend this Superannuation to the whole community seemed to be a good idea; as the roll out of the restriction to the pension payout was needed due to the old fund no longer being separated from the consolidated revenue bucket, further savings needed to be made to the payout from the ‘bucket’ and the superannuation system seemed to be excellent. As many union groups were involved in raking money from superannuation schemes it was to get their support, so why not.

Paul Keating in 2018 admitted that the superannuation scheme was not working well as he cold see, as I had pointed out at the time, that retirees who were on low income or had breaks in employment were not having sufficient to live beyond  a few years after retirement and so he called on the government to create an insurance scheme to assist Australians who live beyond  80 years of age as their retirement funds would have run out for many of them at that age.  While he did not admit that the retirement plan he delivered had failed he was admitting that there were issues for those who lived over 80 years of age.

In Summary:

The original pension plan where all contributed an equal % of their income to a dedicated retirement fund and received and equal amount of money from the fund was manifestly a better outcome for all in retirement as all would be on an equal income status in retirement though the wealthy may have brought more assets to their retirement that also contributed far more to the dollars (or pounds as it was then) than they could ever receive from the fund as it would require them to live well beyond 200 years old to begin to get near to the amount that they contributed into the fund.

It is my considered view that special funds need the protection of the constitution so that governments who will seize on any funds to retain government will not be able to touch dedicated funds. Such funds need to be protected by an independent Auditor General who like the Governor General who while may be appointed by the government has powers apart from those granted to him by any government.