SuperTalk Blog

25 Years of Super


25 Years of Super in Australia

A milestone event ticked over on 1 July without much fanfare. It has been 25 years since the introduction of compulsory employer superannuation in Australia.

The Keating Labor government introduced legislation which required employers to pay an additional 3% of their employees’ salaries into regulated superannuation funds from July 1992.

Before that, award superannuation had been negotiated for some workers and government employees had been covered under generous defined benefit schemes for decades.

However, many Australians had no superannuation and economists were warning policymakers that as baby boomers transitioned to retirement, this would create a huge problem for the age pension scheme that most Australians depended upon.

Compulsory super was part of a package of legislation that was designed to protect workers investments, give workers and employers a say in the management of funds and set up a low-cost dispute resolution tribunal.

Some business groups originally opposed compulsory superannuation but successive governments have embraced super as the centrepiece of retirement incomes and the current government has been actively involved in superannuation reform.

Compulsory contributions rose to 9% by 2002 but have stalled since and are not due to rise to 12% until 2023.

Employment super consists of compulsory employer and voluntary member contributions and has just passed $2.3 trillion in funds under management, with most funds recording double-digit returns in 2016/17. The balanced investment option which most Australians have as their default option in super has consistently outperformed CPI and bank interest rates.

For an industry that size, there have been remarkably few scandals, rip-offs and collapses.

This is due to a combination of factors including strict investment rules, consumer protections and proactive regulators.

Of course, as Minister Kelly O’Dwyer recently reminded the industry, the superannuation system is not perfect and there are problems that still need addressing.

Women, who typically experience broken work patterns due to childbearing, have inadequate superannuation and the disabled might also be forced to leave the workforce prematurely, although group insurance can top up their retirement incomes.

Superannuation tax rules have often changed making retirement planning difficult and dispute resolution has been a recent focus with the Superannuation Tribunal to be rolled into a mega- ombudsman scheme.

There have also been many stories of super not being paid and much still needs to be done to educate Australians about their super.

But overall, the success and stability of the Australian superannuation system makes us the envy of the world. We should celebrate the anniversary of employment super.

John Berrill

Principal, Berrill & Watson Lawyers

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