Is superannuation guaranteed?

With Labor introducing changes to superannuation and the LNP promising to repeal those changes, Australians are once again left uncertain about whether they will have enough to retire on.

Compounding that issue is the fact that it is now extremely difficult to get a full aged pension. First, let’s look at superannuation.

For many years until 1976, what superannuation arrangements were in place were set up under industrial awards negotiated by the union movement or individual unions.

At that time, the aged pension was still a guarantee, so superannuation contributions were not compulsory. They were an added bonus to future retirees to have a little bit extra for retirement.

Superannuation arrangements changed in 1983 under the Hawke government. The trade unions agreed to forgo a national 3% pay increase which would be put into the new superannuation system for all employees in Australia. This was matched by employers’ contributions.

Employers’ and employees’ contributions were originally set at 3% of the employees’ income, and has been gradually increased.

At the time of its introduction it was met with strong resistance by small business groups who were fearful of the burden associated with its implementation and its ongoing costs.

These groups launched a fear campaign, stating that superannuation would mean that the aged pension would be lost. The government of the day assured everybody this would not be so.

Then in 1992, the Keating government introduced the superannuation guarantee. It forced compulsory employer contributions on all employers, which would increase gradually from the 3% in place at the time to 9% in 2002, and compulsory employee contributions beginning in 1997. Employee contributions would begin at 1% in 1997, rising to 2% in 1998 and reaching 3% in 1999.

The most concerning change, however, is that they introduced means testing on the aged pension, which also included superannuation. The aged pension was no longer a guarantee, which is what business groups had predicted in 1983.

Keating brushed this off, saying that superannuation would more than compensate for reductions in the aged pension. The flaw with this was that the guarantee asumed that all people would work uninterrupted for 40 years, then retire on superannuation.

It didn’t take into account the disabled, long-term unemployed and lower socioeconomic groups who didn’t have the high income that others may have had.

It created a class system, where those that earned most would have more to retire on than those that didn’t earn as much. Still, the assets test was reasonably high for the time, so there wasn’t really much of a threat to the full aged pension for low income earners.

Then the Howard government cancelled the employee contributions in 1996, meaning that people would have less to retire on. New government, new goal posts. This was to continue with every new government right up to the present.

People started to worry about their superannuation. Under Hawke, they had planned for their expected retirement scenario, under Keating that scenario changed, and then it changed again under Howard.

It got worse. Howard reduced employer contributions to exclude overtime, meaning that the employer contribution was only paid on ordinary time worked. This meant that people would have even less superannuation than they had previously planned for, but it benefitted employers.

The Rudd-Gillard government tried to fix this in 2013 by promising to slowly increase employer contributions to 12%, starting on 1 July 2015 and ending on 1 July 2019.

Again, employees had to retink their retirement scenario, believing they would have more to retire on. This seemed like a good thing for employees, but not for employer groups.

Then the Abbott government came to power in 2013, and deferred the increases by six years, much to the delight of employers, but meaning that employees would once again have less than they had planned for when Gillard had announced the increases.

Under the Morrison government, both superannuation and aged pension became even less of a guarantee, with Morrison insisting that people should be able to access their superannuation funds far more easily.

With the rising costs of living and wage stagnation under the previous LNP government, people jumped at the chance to access this money, many not considering that this would mean they would no longer have enough to retire on.

People also thought they would still be able to access the aged pension, but this was not to be. Morrison lowered the income and assets test to access the pension, and introduced a range of reforms to make it harder to get.

Many people still do not fully comprehend that they do not have enough superannuation to retire on, and that the aged pension is extremely difficult to get. What then lies in store for future retirees?

The current Albanese government went to the 2022 election promising not to make any changes to superannuation, but now they have. While these changes have been welcomed by the vast majority of people, Peter Dutton has vowed to repeal the changes if he becomes Prime Minister.

So again, we have no certainity about our superannuation. The superannuation system is a mess, the Labor government is trying to fix it, and the LNP have vowed to make it a mess again.

Given the LNP’s history of massive changes to superannuation which decrease benefits for employees but favour employers, one can only wonder what other negative changes a future LNP government will make.

Indeed, the LNP seem to be wondering this as well. They have announced they oppose the current government’s plans, but are unable to propose anything better. All they want to do is undo whatever Labor do, with no plan for themselves, and no plan for future retirees.

We all once thought that the aged pension would be a guarantee. That’s not the case any longer.

With every government making drastic changes to superannuation, it is impossible to guarantee that superannuation will be sufficient to retire on.

Perhaps the term “superannuation guarantee” is not really appropriate any more.

Craig Hill is a Brisbane-based Social Justice Campaigner, Writer, Teacher and Business Consultant. He has campaigned for social justice in Australia, promoted human rights in China and worked with the homeless in Honolulu. He holds a Graduate Certificate in Education and a degree in Management.