It could have been a SUPER idea

The introduction of superannuation in Australia was initially promoted in the 1930s and 1940s by the conservative side of politics. It was opposed by Labor politicians who thought that superannuation would undermine public support for the age and invalid pensions. These pensions were categorical and means tested very much in line with the charity and poor law systems which had preceded them. They were meant to perform similar functions to that of Bismark's social insurance scheme in Germany which provided workers with a universal cover in the event of injury or old age.

In Australia, some private employers, federal, state and local governments offered superannuation to permanent employees in an attempt to retain long serving staff. Casual and temporary employees were not included in such arrangements. Higher paid employees were the most likely to have superannuation. By 1986 only 22% of female employees had any superannuation.

During the period of the Hawke Government, Labor changed its approach to superannuation. It introduced a compulsory privatised form of superannuation - a far cry from the social insurance model prevalent in Western Europe. Employers were required to withhold a set percentage of all wages over specified limits and remit them to the employee's superannuation fund. This model of superannuation extends the inequalities experienced during the working life of employees into the post work phase of peoples' existence.

Why laissez faire superannuation?

During most of the fifty years preceding the introduction of Labor's superannuation scheme Australians frequently declared that Australia was an egalitarian country where Bob was as good as his boss. Why then did the Party which claimed to represent the working class choose a pro-capitalist neo-fundamentalist form of superannuation?

There were many forces which culminated in this outcome. First there were the churches.

Anglicans' raison d'etre centered on legitimising existing privilege. The Catholic Church, during the decades following World War II, was so preoccupied with fighting Communism and liberationist theology that it neglected its social justice teachings. By the time it had slain both these dragons it was engulfed in the saga of priests preoccupied by choirboys with bums which, for all the world, resembled jelly on sticks.

Mainstream protestant denominations mainlined on the promotion of the Protestant Work Ethic and their concern to find ways to sanctify the accumulation of personal wealth gained via shoddy used car dealing all week followed by psalm singing on Sunday. The Evangelicals were on much the same track but had had an even more difficult job trying to convince their elderly followers that becoming born again would not result in their losing their seniors card.

The non-mainstream political groups who might have been able to keep the Labor Party true to its working class roots were no more successful. The Wobblies, the International Workers of the World, had allowed themselves to be criminalised by getting involved in forging Australian currency. In the wash-up their membership splintered into a variety of anarchist groups. The Communist Party of Australia shattered on the rocks of Russian State Capitalism and Stalinist pogroms and the Hungarian and Chinese Cultural Revolutions.

The last hope was the emergence of a powerful secular philosopher but, unlike the French, there is no tradition in Australia of embracing independent thinkers of the stature of Sartre.

Pragmatists failed us then and will do so again.

Hawke had championed the demise of craft unions and their amalgamation into huge unions such as the CMFEU. There was a subsequent increase in power of the leaders of these super unions. Faced by a dramatic decline in membership several union leaders saw an opportunity to prop up their power base. They pushed strongly for the formation of Industry Superannuation Funds which would be able to compete with the insurance and banking industries' funds for members.

Equity

Between 1960 and 1990 many of the funds set up by private firms invested all their workers' superannuation in the firms where they worked. Lots of such superannuation funds went to the wall before the workers could draw on them. Other fund managers embezzled the bulk of the money. Nowadays better prudential arrangements are in place and the would be rorters have to be a bit cleverer. The people who, in Arthur Daly's terms, are on to "a nice little earner" are generally doing it by the book: it is just that they get exorbitant salaries for advising on which shares to purchase or sell.

In the widespread European social insurance style of superannuation, the amount people receive in superannuation is determined by the government and is roughly in line with the individual countrys' capacity to pay.

In Australia, the bulk of defined benefit schemes are now closed to new members. As a result, the amount of superannuation received is proportional to the amount paid in, the wisdom of the funds investment advisors and just plain luck. Under such systems John and Michelle might have started work on the same day, made identical superannuation contributions for 25 years to different superannuation companies and end up in very different financial circumstances.

Even Industry Funds provide members with a range of investment options,such as: high growth, cash, balanced, socially responsible and so forth. Lucky members might make all the right decisions and maximise their returns whereas their work colleagues making different decisions might end up with far less. The "choice" offered is really a Hobson's Choice when most of us have little knowledge of the finance system.

The percentage of women with some superannuation may well be much greater than the 22 % it was in 1986 but, because they earn on average about two thirds of the salary men receive, because they have the bulk of caring responsibilities foisted upon them and as a consequence have interrupted employment histories and often sacrifice their career when husbands are transferred, they don't receive anything like the equal superannuation payment they would under a social insurance model.

The Community Development Employment Program (CDEP) has been operating on Aboriginal Communities since 1976 but even when Aboriginal people worked 5 days a week they never received superannuation. The Gillard Government has converted the CDEP in the Northern Territory into a welfare program so that it can put half the salary onto a Basics Card which can then only be used to make approved purchases. Because Aboriginal people live on average 17 to 20 years less than other Australians even if they had access to superannuation they would get far fewer benefits than do other Australians.

Many Australians have seasonal, casual or part-time employment. Many of their employers either don't deduct superannuation contributions or if they do don't pass them on to the superannuation funds. Even if such employees' superannuation contributions are paid into a fund, because of the short term nature of much of this employment, workers end up with their superannuation scattered over a number of funds where the bulk of their contributions are eaten up in fees.

The banking and insurance superannuation funds generally charge higher management fees than do Industry Funds and this erodes the final payout amount received when people in these schemes retire.

Professor Gerry Hughes from University College Dublin compared the Irish privatised superannuation with the New Zealand State funded superannuation and concluded that the New Zealand system was far more equitable.

Pragmatic government

Hawke and Keating wanted privatised superannuation to help ease the cost of age pensions of an aging Australia and to increase private savings. The leaders of the big unions wanted superannuation to help boost their flagging power base and to give them some control over industry decisions. The general public wanted it because they did not like the way the government used the pension system as a control mechanism, they had not been adequately informed of the viable alternatives by religious and secular leaders preoccupied by other things and many people were driven by the belief that they would receive disproportionately more than their fellow citizens if privatised superannuation was introduced.

So Australia finished up with a superannuation system which provides greater financial benefits to the rich (by way of foregone tax) than it pays to the poor. Hundreds of thousands of the richest obtain more in benefits from this system each year than do the poorest age pensioners. A social insurance superannuation system would be far more equitable but it is still not the best option. The reason it is not the best option is that superannuation is a mechanism designed to cope with old age and invalidity.

The best option would be one which would guarantee every permanent resident an income sufficient to allow everyone to live in austere dignity whatever their circumstances. It would protect them when they were young, when they needed to retrain or study, in times of temporary illness or unemployment, family separation, old age or permanent incapacity. Such a system is called a Basic Income and is being seriously considered by several governments in Africa, South and North America and Europe.