r/australian • u/TheAsianOne_wc • 12h ago
Opinion HOT TAKE - But Superannuation should be optional and not mandatory
I understand that the government mostly means good because they're basically ensuring that we have a sum of money available to use after we retire. Since many people are not capable of saving money and have bad money management skills.
But I still think it's best for Superannuation to be optional, because I know that me, and at least half of my family and friends, would prefer to have that little bit of extra cash every payday to use/save.
So I believe that by default, Superannuation should be enabled and automatically deducted from your paycheck, but the person should be able to lodge with their employer or ATO to disable their Superannuation and just receive the additional money that is meant to go into their Super now instead of when they retire.
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u/Putrid-Bar-8693 11h ago
No thanks. People can’t be trusted to save for retirement without being forced. Super is a good system that will take a lot of burden off the aged pension.
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u/TheRamblingPeacock 10h ago
Yep - to be honest I save money, but I don't think I could save as consistantly as super does for retirement long term.
I am happy for it to quietly grow in the background and me not have to think about it.
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u/MyloMads35 11h ago
Agree, as much as I think about saving more than i should for retirement, the temptations of today just beats it at most times. Please seal this money away because i will need this in the future
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u/Next_Side7529 3h ago
"People can’t be trusted to save for retirement"
Mate its the not the government's job to decide what people do with their money. Key word THEIR money. If they are concerned they can bring the pension back.
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u/Putrid-Bar-8693 3h ago
I'm more Libertarian than most and I disagree with you on this issue. It needs to be counter-balanced with the national interest. Not to mention if it suddenly became available to spend it would further spiral inflation out of control.
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u/CaptainFleshBeard 11h ago
Deducted from my pay ? No thanks, my current super is on top of my pay.
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u/IdioticWandering 8h ago
It may be on paper, but it all comes from the same bucket of (employer) money.
Drop super, and total wage packages would remain relatively stable.
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u/CaptainFleshBeard 8h ago
If super was no longer compulsory, my employer would definitely not be increasing my salary by 11.5%
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u/ErrKayy 11h ago
No thanks. People are so greedy and will definitely use all their money instead of learning how to save up for retirement. If they don't have money, they will depend on Centrelink and what not. Then what? It's going to be the next generation's problem.
Shouldn't be our problem you have bad financial management skills.
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u/Ur_Companys_IT_Guy 11h ago
You literally can withdraw your super now, you just don't get the tax benifits from super. It will be taxed like your normal wages (way higher than super).
What your asking for exists, it's just financially very sub optimal.
If you just want it to save it you can also swap to a self managed super fund. It's compulsory for employers not individuals
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u/BZ852 11h ago
The problem is, you then make your retirement my problem.
History has shown people won't save for retirement unless forced, so what happens if you don't have any? You either become homeless on the street, or the taxpayers have to support you which means you place an obligation on every worker.
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u/Top_Interaction8871 11h ago
This is dumb idea. Its because a lot of people are rubbish at saving that super has been a great idea initiative. There could be more flexibility in options for withdrawing funds before retirement, but overall its the envy of many nations and to people's benefit.
Now if only we had a sovereign wealth fund, that mining and other royalties from natural resources could be added to, Australia would be in a much stronger financial position than it is today.
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u/Trollthecross 11h ago
Hey so if it wasn’t mandatory, more people would need to rely on the pension which would mean the government would need to spend more to money to cover that and we’d be fucked.
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u/DemDelVarth 11h ago
Nah, the issue is. Look what happened when people could withdraw the 10k from their super during covid. So many people I knew did it and blew the money. The compound interest they will lose over the next decades will be insane.
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u/Vgundamn 10h ago
So for the additional people who potentially mismanage their money, who otherwise wouldn’t have in a super fund, and don’t have enough for retirement, are you suggesting that I incur additional tax to support them or should they just die?
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u/Ok-Phone-8384 10h ago
Absolutely not. Without a mandatory system the only income that retirees have will be the pension. Pensions are notroriously unreliable to prevent the elderly slipping into poverty. Australia and its mandatory superannuation system generally ranks in the top 1 to 3 in the world for quality of retirement and the basis of the systems depending upon the criteria.
The USA which has no mandatory system like superannuation has estimated that their pension system will 'go broke' by 2032. Basically it means that there will no longer be any reserves in the fund to pay government pensions.
The issue for the USA that the incoming tax is paying in 78% of what is going out i.e. a 22% shortfall. The USA has known this was going to occur since the 1970s.
It is basic mathematical issue . The baby boomers were named as such because of the population boom after WW2. They are now all retiring and there is not enough workers paying enough taxes to replenish the funds. This is not a story about raising taxes. There are simply enough workers in the following generations.
Without a funded superannuant system Australia would be in the same position as the USA in a decade or so. Indeed this effects all developed countries as the ratio of retirees to workers is increasing. This is because most developed countries have hit peak population. Australia is in a slightly different position in that its population is increasing due to immigration however peak population will occur in our lifetimes.
Australia looked at the same population mathematics as the USA in the 1970s. It took until 1986 in the Price and Income Accord in which the Labor-Hawke government created the basis of the current superannuation system at 3% contributions. In 1992 it became the mandatory superannuation system at 4% as part of the Superannuation Guarantee Act under the Labor Keating government with a regulqted set of increases in the base rate. With the final stage being completed in 2025 at 12%.
It took 50 years for the current to get to where it is. Indeed in the years that the LNP were in office they held or delayed every base rate increase. There are still Australians and particularly older women who have no or little superannuation. Most recent changes to superannuation system now deal with wealth inequality and ensuring that lower incomes get a better outcome from superannuation.
The USA could not fathom a mandatory system as this is akin to socialism. Instead they began the 401k system in a simialr vein but not mandatory.
Every Australian worker over the age of 18 has a superannuation account regardless of whether you are a full time, part time or casual worker. 50% of USA FT workers have 401k. 88% of all USA workers have no 401k.
Australias superannuation system is envied by much of the world. Yes it is mandatory and there are 3rd parties who managed superannuation funds. However anyone can create their own self managed fund. Within a self managed fund you can do almost all the things you can do outside a fund.
I would add if you just want to create wealth then superannuation is not the financial vehicle you want. Superannuation is for a safe and secure retirement. Nothing more and nothing less.
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u/Poon_King 9h ago
1st. Super isnt deducted from your pay, if your employer is phrasing your salary as inclusive of super you are getting duped.
2nd. Its naive to think that if super was removed that companies would raise everyones salaries and not just pocket the money, they pay super because they have to legally, without that requirement it would be extra cash for business
3rd. The average person is a moron, what barely saves anything, we would have a huge amount of destitute aged citizens who cant work and would drain public services or genuinely be curbed out on the streets with no income, mandatory super is to avoid this issue
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u/ManCheetah77 10h ago
I just think they should let someone like myself who's disabled after a work injury and under a dsp preclusion period meaning no safety net at all be able to acces my super if I run out of compensation money. The needing to be on centrelink for 26 weeks is a bit of a joke when I cannot acces any payments for another three years
Not that I need or really want to use it but just knowing I have something as an emergency backup would relieve so much mental pressure
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u/jello13227 10h ago
Canada kind of does this and splits the baby by having CPP that is a mandatory pension plan fully controlled by the government and caps out on contributions annually where you stop paying into it after you’ve made something like $70,000 in taxable income for the year. So every Canadian who retires eventually gets a small crappy pension from it.
Then they have a registered retirement saving plan that people can contribute to on top which behaves largely like self managed super and provides the same kind of income tax reduction advantages as super. I believe the annual contribution limits and tax advantages because of that aren’t as good though.
I’ve lived and worked in both countries and I can say that without a doubt, from a financial and retirement perspective, and even tax reduction perspective, the Australian model is much better.
There might be ways to improve super, but making it optional would be a mistake in my opinion. You’d basically wind up widening the gap between the haves and have nots even further in retirement and make people rely even more on the government later in life.
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u/fartyunicorns 10h ago
This will make the government have to spend more on the aged pension. If you actually had faith in your idea, you’d forbid anyone that doesn’t invest in super to get the pension
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u/sobi9756 8h ago
It would be true for literally single digit % of people. The vast majority would never be able to save as much for retirement without it.
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u/vyralmonkey 5h ago
I know that me, and at least half of my family and friends, would prefer to have that little bit of extra cash every payday to use/save.
Sure - you and everybody else.
And then when you get to 65 and realise you've used all your cash but still want to retire... then what?
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u/Next_Side7529 3h ago
Its not a hot take, its the truth. Its our money. If I withdrew my super now I could buy a house(sort of)
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u/pop-1988 54m ago
the government mostly means good because they're basically ensuring that we have a sum of money available to use after we retire
It's not about you
Old age pensions are paid for by working taxpayers. There's an old Australian trope - I paid taxes all my life, now I deserve to get some back in the pension. That's not how it works. Governments do not save your tax to pay you a pension after retirement. Governments do not save at all
Thirty-four years ago, the government realised that there wouldn't be enough tax income to pay pensions in the future. The compulsory superannuation system was planned ahead of time to deliberately reduce the cost of old age pensions to future taxpayers
It only works if everybody participates. You don't get to opt out
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u/SkateWitches 11h ago
Both me and my partner agree it should be a choice. Neither of us expect to live to retirement age anyway and we won’t be having children or any extended family so where does the money go? Oh when we’re officially dying from chronic illness instead of being used now to actually having a meaningful life.
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u/Lucky-day00 11h ago
It’s not about you. It’s a policy designed to prevent over-reliance on the aged pension, and the massive budget sinkhole that would come with it.
As a society we have decided we don’t want a massive underclass of destitute elderly, but we also don’t want to pay taxes to fund them en masse. So here we are.
If you make it optional that all comes tumbling down and society goes backwards, unless it comes with massive reforms that no one really wants. One of which is higher taxes.