Could we nationalise the superannuation system?

Super reforms appear to have better served the financial sector than fund members.

Could we nationalise our super?

Two decades of reforms, reviews and inquiries appear to have better served the financial sector than the interests of super fund members.

At first glance Australia’s 214 major superannuation funds are performing well, giving a healthy 9.2% return on the A$1.4 trillion we have deposited with them. But there are issues with our publicly mandated but privately controlled superannuation system.

Admittedly, our current system provides a range of benefits - increasing retirement incomes, giving us plenty of choice between funds (in theory if not in practice), and investing in the Australian economy.

But the operating expenses for Australian funds consistently and significantly outstrip those in other OECD countries. Fees are high and there is little evidence that higher fees lead to better services.

In 2009 the Inquiry into Financial Products and Services in Australia recommended there be an annual check on the quality of advice. The only superannuation-related survey that has been undertaken to date found that 39% of advice was poor and only 3% was good quality. No further surveys have been conducted.

Australians are forced to contribute to superannuation funds, without the right of exit, but they aren’t protected from high fees or bad investment strategies. A nationalised superannuation system, or one that combines private and public super funds, could simplify the system and reduce costs.

Baked in problems

Australia’s system wasn’t originally intended to be entirely privately-run, which has left us without many necessary protections (such as appropriate disclosure of fees and charges).

Australia was almost alone among OECD countries in reaching the 1980s with no national employment-related retirement income scheme. There had been at least ten attempts to set one up between the 1890s to the 1970s. All failed to win support from employers, existing superannuation funds, life offices and state governments.

An additional attempt was made in the last Parliament of the Liberal government in 1972. The incoming Whitlam Labor government also tried to introduce a national superannuation scheme in 1973, establishing the Hancock inquiry.

Consistent with its recommendations, the Hawke/Keating Labor government intended to move forward with a national scheme. However, against the backdrop of past nationalisation failures, recession, high inflation, a wage freeze, strikes, declining union membership, and the increasing discontinuation of superannuation products, the government instead privatised it.

Thus, the Hawke/Keating Labor government was a major winner of a privatised scheme gaining electoral support from a coalition of private interests.

Absent from this coalition were the fund members. There is no evidence of any consultation process with either the fund members themselves and/or any consumer representative groups prior to the development of our present, privatised regime.

The Superannuation Guarantee scheme introduced a minimum employer contribution to superannuation for most employees. This scheme was a windfall for the financial sector, as they received a guaranteed, trillion-dollar stream of superannuation contributions to look after with no exit rights for members.

The union movement would also appear to be a winner from privatisation. The privatised system allowed the unions to expand the number of their existing industry funds to earn more administration and investment-based fees. The 41 industry funds currently hold A$545.2 billion, compared to the A$587.8 billion held by the 128 for-profit retail funds.

It could be argued that the losers in this mandatory regime are the fund members who were marginalised from the outset. As it was originally intended to be a government-run system, many of the administrative processes necessary for an efficient and effective privatised system were originally absent.

For example, there were no codified accounting, reporting and disclosure requirements. No mandatory requirements for the disclosure of fees and charges. No codified audit report requirements. And, for nearly a decade, the regulator did not have appropriate constitutional powers to enforce civil and criminal penalties against non-complying trustees.

Two-decades of reforms have remedied the constitutional, auditing and accounting issues. But significant issues remain, including limitations in the disclosure of fees and charges and the related issue of conflicted payments.

Alternative super systems

In theory, there are alternative superannuation models for Australia to consider. For example, there are nationalised schemes such as the government-run Canadian Pension Plan.

All of the funds from the Canadian Pension Plan are invested by Canada’s Pension Plan Investment Board, which operates with a clear mandate to maximise returns, without undue risk of loss.

Nationalising the superannuation industry in this way appears to have benefits - members would receive the same return for equal contributions, employers and employees would only have to deal with one fund, and the amount spent on running the fund (for example on administration, marketing) would be reduced.

There is also the option of adopting a combined system, as in Norway, which features both national and privately-run superannuation funds.

The ConversationIn reality however, given the coalition of vested interests that have forged Australia’s existing, publicly mandated, privatised system, only the voice of the members themselves can force an honest and open debate on this important issue.

Suzanne Taylor, Lecturer/Co-Ordinator, Queensland University of Technology

This article was originally published on The Conversation. Read the original article.


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    14th Nov 2017
    Superannuation is a compulsory means by which the reigning Government have each and everyone of us save for our own retirement. IT CONSTITUTES A PORTION OF YOUR WAGES/SALARY. it is not a free gift from anyone, you have earned it. No work. No Super. Do not contribute to this scheme beyond your obligation. Fund your own finances with investments of your choosing. Opt out of the system at your earliest possible time. You will not regret this action. Take control.
    14th Nov 2017
    Agreed.... my last two jobs were temporary or casual - and the super was simply eaten away by never-ending costs.

    A lie from start to finish and always was.

    At the very least small amount accounts should be quarantined from costs etc, otherwise it is ridiculous and just a waste of YOUR money to pay for a service you never benefit from
    14th Nov 2017
    What? Nationalise it so they get their hands on it to AGAIN steal it and put it into consolidated revenue?
    We already have a national superannuation scheme. It's called the Old Age Pension.
    What we need is people power to rise up and take back the funds stolen from this scheme. To start we must STOP CALLING IT WELFARE.
    14th Nov 2017
    You have been reading my posts - welcome aboard. My scheme would take in the OAP contributions from tax strands (as has been the case since the OAP was set up - forget the lies about 'consolidated revenue = slush fund), plus contributions, but with limits on how much fat cats can salt away in super so as to avoid tax, and would include ALL super schemes under the same rules and rates of return - including that of the politicians and their running dogs.

    It would be run by an elected board which must include a percentage of pensioners and SFRs, so as to keep it honest, and by statute no political party may touch it, other than submitting claims for finance for infrastructure projects and other valuable to the community things. those may be accepted or rejected on... (dare one say this much abused word?).. Merit!

    Fair play for all - and enough of the rorting.
    14th Nov 2017
    Good thought, Trebor. I'll support that.
    14th Nov 2017
    Super must never be nationalised. Crooked politicians will work out how to steal it just like they rolled over the pension tax into consolidated revenue.

    Agree, TREBOR, good scheme, including removal of all special schemes for Politicians. Also, need the Outcome to be an Universal Pension with no Asset or Income tests (tax all income above the OAP) with qualification based on say 20 years in Australia paying taxes (to remove carrot for new immigrant freeloaders), with suitable tests and a lower rate (like Newstart) for those who don't qualify.
    14th Nov 2017
    George..Good thoughts, this issue is bringing up a few good ideas... I think... though I am wary of 'classes' of pensioner. Let me think about it....
    14th Nov 2017
    I like the idea of a national super scheme but on past performance could you trust this Government that can't even run the country.A national fund that would buy back all the state owned power and water Authorities that they have sold for peanuts.It could be used to invest in infrastructure so we can jam more useless people into our major cities.What a bloody mess the country is in.
    14th Nov 2017
    Really floss you must look further than the end of your nose on this issue. This Government, like all Governments will eventually pass. Then what? Is there any guarantee that the next or subsequent Governments of any hue, would not do precisely what you predict the incumbent would do? Or at the very least subsume the trillions of dollars then give it all away in handouts like drunken sailors on shore leave?

    And seriously, your statement " we can jam more useless people into our major cities" really needs some sort of qualification. Or are you giving an honest opinion that all those who live in major cities are 'useless people'?
    14th Nov 2017
    It's actually a matter of calculating the payout costs - and yes - they are there in spades - and then calculating the cost of the 'new' superstructure (not quite infrastructure - this is the governing structure for the newly republicised infrastructure) - and then determining a market rate for the 'commodity' or service or utility.

    I agree with the concept of a full review - as a starting point - on immigration - and a good look at the makeup of current immigration and what it imports for the future of THIS nation.

    Elsewhere there are screams of over-crowding and a call for a 'one child policy' for THIS nation - why then are we continuing to be the dumping ground for the Third World (other than the calculated design that WE take our rightful place as part of the Third World, being as we are a Banana Republicand are rapidly establishing a permanent corps of peasants who suffer endemic un- and under-employment as their lot unto eternity - when you ARE a big chunk of the dirty Third World, the beggars are some of the scenery) ......
    14th Nov 2017
    Oh - and as a starting point in the 'privatisation' debacle - any utilities including roads put out there may only be leased for a specified time not exceeding ten years, and will be subject to renewal review on a number of points, including failure to perform and creating excessive costs.
    15th Nov 2017
    .. couldn't run a tap if it didn't have a broken valve.....
    15th Nov 2017
    Many of the free trade agreements have corporate rules forbidding nationalisation of privatised assets. It may not be possible to buy back the utilities without a revolution. Very unfortunate.

    14th Nov 2017
    The superannuation companies are scammers overseeing a ridiculously byzantine and irrational system. They fiddle about with MY money, when I need it NOW.
    14th Nov 2017
    However the Industry Super funds generally have performed better with high growth for their members than the retail and other funds. Thats the most important thing
    14th Nov 2017
    Yes - and the Guv wants to let their mates get their hands in those as well - on the other hand, they do pay the likes of Bill Shorten to run a Union fund... or course a man of honour would say - No - I'm already getting enough, thanks....

    Enough said..... Unions can be as bad a 'business venture' as any Rip-off Roadways or Power Price Plunderers can be ...

    14th Nov 2017
    I can see good reason to have a system similar to Canada where we can have an Australian Pension Plan Investment Board where all super funds are controlled by a Board made up of government appointed members plus members from the public voted in by shareholders (those who have super in the fund). Investment of funds are not to include any high risk ventures and fees are to be kept to cover administration costs only.

    To stop politicians' access to the funds, only the Board can decide where the funds may be invested. When setting up the fund, it should be legislated that any change to the way the Board is managed can only be approved subject to 2/3rds of the vote of both houses of the parliament.

    Over the years that this subject has been discussed in this forum, the main complaint has been the times an employer pays super into an account that suits the employer, not the employee. This would be eliminated. The next complaint has been about the large fee structure that means that there have been profits available for different purposes which could have been shared with the members. This too would be eliminated.
    14th Nov 2017
    As usual - your idea has merit.... something about that past Service mind......
    ex PS
    19th Nov 2017
    I would draw my entire Super out in a lump sum, rather than trust the banks to manage it.
    14th Nov 2017
    This sounds like a political propaganda piece from the current rich man's government.
    I see the routine swipe at unions being involved in the supervision superannuation but need to ask if the funds concerned are doing better or worse than the retail funds? The answer is BETTER. Much better. So why shake out unions if they are providing great returns to members? Unless of course you are trying to stack superannuation funds with cronies bleeding them dry. And there you have it.

    I see nobody has authored this piece of propaganda. The reason why is that governments of both persuasion are cracking their greedy little necks to help themselves to some of the huge pile of money sitting in the superannuation system. It is like honey to a bee. They bastards cannot help themselves.
    The way to achieve this plan is to nationalise superannuation and then roll it into Consolidated they did with pensions....which are now being phased out.

    YLC - please do not run this sort of story as it is bordering on propaganda. Not sure how it has come to you but I am sure it has no place on a retirement website where many have already been hard hit by being thrown off a (rightful) pension.
    14th Nov 2017
    You must be very enjoyable company at dinner parties MICK.
    14th Nov 2017
    Author - Suzanne Taylor, Lecturer/Co-Ordinator, Queensland University of Technology. (as already disclosed this article lifted from "The Conversation")

    Maybe the Industry funds are doing " BETTER. Much better.", however, I can attest to first hand knowledge from past experience of TWU "cronies" setting themselves up for what amounts to a life sinecure on the board of their (then) newly established Industry fund. "Cronyism" is not strictly confined to power brokers and captains of industry, comrades and brothers are equally prone to such human foibles.

    We will rue the day if govt gets their grubbies on this almost inestimable wealth. What is currently required of them is simply to exhibit some leadership: with backbone, and legislate some binding and effective macroprudential policy governing this entire industry.
    Currently far too many fat cats and their sycophantic wanna be's are skimming the cream off the 'rank and file'.
    14th Nov 2017
    reading the comments of our labor micky and seeing he is still not game enough to show his face, he always hides behind a so called ski mask, wish he would go skiing or even attempt to, sorry rescuers, just look at cheap accommendations in the area and you will find him/her behind a computer writing more bull.... to these columns, I just wonder how anybody apart of those rusted on followers the likes of trebor,doormat or floss, his teeth are secondary to his comments, love the comments of triss,"I support this" to an idiotic comment from labor's mickie second in command trebor, it just show how far the attributes of the contributors has fallen,
    14th Nov 2017
    Pardon me, Roy - is Mick the cat that chewed the Lib's news?

    heemie - I'm 'rusted-on' to nothing, you simply can't read. I posted a cautionary note re Union bosses managing super funds upstairs... try to rise that far some time... even you can better yourself with a little effort.
    15th Nov 2017
    heemskerk99. I think MICK should be banned form this site post haste, he is such a depressing man and his hatred will destroy him one day soon.
    15th Nov 2017
    MICK this current government is doing a nice job of working for the corporate overseers. Having our money to prop up their shares must be quite a comfort for listed companies.
    14th Nov 2017
    KSS do you really think that spending the short term gain by selling the farm to cram more people into our cities is the way to go do try to think long term and you will see the folly in this way of thinking.
    14th Nov 2017
    That is a whole different argument than deming 'useless people' to be crammed into urban centres. It was YOUR use of the phrase 'useless people' I object to.
    14th Nov 2017
    The rot started with Menzies' Legacy. Or should that read Menzies' Curse.
    15th Nov 2017
    The current free trade deals may make nationalisation very hard to achieve. We don't know the details but it has been indicated that corporate law is a heavy part of these deals and prevents public ownership in certain cases where is compromises corporate interests.

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