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The superannuation system was great in 1991 - it is now 2021

The Labor Elder Statesman Paul Keating recently penned a piece about the Superannuation Guarantee (his love child so to speak) in which he accused the Federal Government and various regulators and commentators of all sorts of dastardly things. Including being political - as was he in his article.

So, let’s ignore the politics and focus on efficiency and people’s retirement.

Keating of course hammered, in his own inimitable and entertaining (for some) style, those who do not agree with him. He attacked Senator Jane Hume, the current Minister responsible for superannuation, in a very political manner. Senator Hume, if she decided to move to the lower house of Parliament, could one day be Australia’s first female Treasurer, but that is for the future.

Keating did however design and introduce a great system; the Superannuation Guarantee provides for the future of millions of people in their older age. Yet, can there not be an argument that the current system has aged? The system is of course creaking and leaking but with improvement will better add value to people’s retirement funds through the creation of competition and choice.

When the current system was designed it was 1991 and a very different time. The mobile phone was just in its infancy and early models were the size of a brick; smart devices weren’t even considered; computers were rudimentary compared to what we have now; the internet was hardly a thing; the expression ‘search engine’ didn’t exist and people let their fingers do the walking with the yellow pages; people used pens a lot more than they do now; - and emails were few and far between; and banking was by hand and passbooks.

The new superannuation system became an opportunity for unions and business associations to cooperate in dividing up the industrial landscape so that they all got a share of the spoils. The directors of industry funds came not from the finance sector but from the management of the unions and associations. Over the next 30 years they made a motza.

Now, Keating and others can argue about what the rate of superannuation should be and those types of things, but let’s talk about efficiency and helping members of funds have more money in their retirement through saving administration costs by streamlining the collection process.

Currently superannuation funds collect billions of dollars from over 915,000 employers on behalf of some 12 million workers. There is some $2b of people’s superannuation not being collected each year (according to the ATO). Yet the funds and their directors do not want to solve that very real problem and also save on administration costs. They could do this by putting superannuation in with PAYG. Then the worker (the actual owner of the money) could tell the ATO to which fund to send their money.

The worker would have real choice and the funds would save upwards of a billion dollars in administration costs as they would only need to collect money from one source -the ATO - instead of closer to a million sources (employers). The funds would no longer need to keep any records of where members work; they would no longer have to mail and contact employers when they (the funds) lose information and are at a loss about where someone works or how many places a person may work.

The funds don’t want that because they are terrified of competition. Plus, I have been told by those representing industry funds, they believe that workers aren’t smart enough to select their own fund as it is too complicated. Who says that the directors of funds are any smarter than their members?

In the article Keating states that ‘economics is a science about change – the degree of change over time.’ That is true and the change that was needed to administration of superannuation over the last 30 years has been held back by those who know nought of economics - the directors on the industry funds.

Keating states at the end of his article that ‘The case against the increase in the superannuation guarantee is entirely political –– it is not an economic case…’ So, using the same logic it seems that the case against changing the collection process is not an economic case but is entirely driven by vested interests, fear of competition and a need for associations and unions to be involved.

Keating can now show the wisdom of experience and age by denying his allies on the boards of industry funds, union and industry representatives, and demand that the collection process be more 2021 and less 1991, that it catches up with reality and puts workers and indeed the efficiency of the businesses that employ those workers first.

Please, Mr Keating, while you still have some influence. Help change the collection process that you invented when the world was pre-digital, pre-mobile and pre-industrially-historic.



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