Not so super


There's one positive aspect of global financial chaos. It throws into question the Australian model of funding our retirement—compulsory superannuation.

In the last quarter, Australia's $1.15 trillion in superannuation funds declined in value by 3.4%, taking their annual loss to 11.6%. The predictions are that the loss will reach 17-20%, but that's just a guess about how much stock markets will dive. Losses could be much greater than their present $100 billion ($7000 for every male and $3600 for every female retiree).

Fund managers have most of our compulsory superannuation deductions parked in investments that are losing about $1 billion a day. In a country with the third greatest rate of retirees in poverty in the advanced industrial world, is this model the best for us?

The superannuation industry is in no doubt. Share prices go up and down, but over time the return to superannuants has been positive — 7% a year since Paul Keating, backed by then-Australian Council of Trade Unions secretary Bill Kelty, imposed the first 3% wage deduction on our pay packets in 1992.

Nearly everyone thought compulsory superannuation would kill many birds with one stone. By generalising self-funding for retirees it would ease the burden on a federal budget facing pressures from "baby-boomer retirement"; increase income above the miserable pension level; boost the pool of "national savings", reducing reliance on foreign capital; elevate union influence on the economy via industry super funds; and be a goldrush for the finance industry.

What are the lessons of the last 16 years? Firstly, the "aging crisis" is largely fictitious. In the future, Australia may have proportionately more retirees than workers, but the ongoing increase in productivity is such that, even without changing present economic "settings", the federal budget can readily afford it.

Reserve Bank of Australia studies have also found no increase in the national savings rate (basically because bloody-minded workers responded to wage cuts due to the ACTU-ALP Accord by saving less!). The Australian current account deficit is bigger than ever and the idea of "national savings" has been made fuzzy by financial globalisation (do Rupert Murdoch's profits belong to Australian or US "national savings"?).

Super has certainly made many Australian households wealthier, but the family home accounted for a greater part of this wealth and superannuation income fed into the housing price bubble. Now that bubble is deflating fast.

Super also lifted the exposure of Australian working people to the stock market. At the beginning of the 1990s, 15% of Australians over 18 owned shares, by 2006 that figure had reached 46%, with 1.3 million (8.2%) having shares purely as a result of compulsory super.

Lastly, the trade union movement has acquired a more direct stake in the profitability of capitalist industry, as well as a growing dependence on the fruits of "business unionism" rather than on the contributions of members.

So what? Is there nothing for workers to do but wait until the next economic upturn, taking care not to "cash out" too soon?

No — compulsory superannuation must end. It is coercive, putting workers in the hands of often incompetent money managers. Those who want to carry on having their hard-earned income gambled for them by smart or mug punters should have that right, but the rest of us should also be free to do spend our wages as we think fit. (Note that since 2000 it would have been a smarter investment decision for the average working family to have paid off its house faster.)

Industry super funds should be gradually merged into a single national fund, with a charter to produce secure returns and promote investments in sustainable infrastructure and technologies.

No doubt, such a proposal will create a storm of protest within the trade union movement, which has put much energy into building up industry super funds, and has helped administer them like any profit-maximising capitalist (but with lower management fees).

However, does the union movement really want to support a system that inevitably produces winners and losers at the same time as leaving the pension system as a miserably threadbare "safety net"? It's time for a big boost in pensions, as the first step in reconstructing retirement income for the class that first created the value the fund managers have been gambling away.

[Dick Nichols is the national coordinator of the Socialist Alliance. Written in a personal capacity.]