A super way to turn a vicious circle into a virtuous one

First, we could require those accessing greater flexibility in the use of their super savings to commit to higher contributions. Second the new field of “behavioural economics” tells us that in situations of great uncertainty - like figuring out how much we should save now to fund a retirement that is several decades away - we look around to see what others do. (Terror of deviating from “normality” is one reason investment managers so rarely outperform the market.)

So, as US Bureau of Economic Research economists argued in their aptly titled paper Passive Decisions and Potent Defaults (which was picked up recently in an excellent book by four young Australians, Imagining Australia), we can influence savings by influencing people’s conception of what is “normal”. That’s easier from government, but it can even be done by an opposition - by simply making increasing your super contributions a talking point.

Our leaders could try making it normal for people to salary sacrifice an additional 1 per cent this year, 2 per cent next year and so on until total contributions are - say - 15 per cent of earnings.

And there’s something much more powerful than talk - inertia. We can establish a system whereby a progressively increasing portion of our own wages are automatically deducted from our pay packet and paid into super. You could still elect to contribute less - completing a form declaring you understand what you are doing and electing to reduce your non-compulsory contributions as much as you wanted.

But by tilting the burden of inertia and the frame of “normality”, we’d trigger a healthy amount of doubt in people’s minds before they unshackled themselves from the mast. If they did end up saving too little, they’d have done so by design rather than default.

To the extent these reforms succeed they’d yield a double dividend: solving the problems we face now, while minimising the degree of compulsion required in the future.

It’s an idea worthy of the wily Odysseus.