Interesting and current opinion piece, I'm sure there would be just as many against the idea as for it, there probably is no right or wrong it will depend on the individuals circumstances.
I’ve been on a decade-long journey that transformed me from a super fan to super’s biggest critic.
In 2010, financial analyst Chris Joye proposed that superannuation funds should consider investing in housing equity.
I opposed Joye’s idea because I was a fan of the super system and thought it would undermine super and increase house prices.
But it got me thinking more deeply about super and started my decade-long intellectual and personal journey that transformed me from a super fan to super’s biggest critic.
In 2010, I was 28 years old and had two children aged under three. I was just embarking on the parenting journey.
What I came to realise was that raising a family was expensive. Paying rent, paying super and saving for a home deposit all at the same time seemed totally ridiculous.
I needed money then, not later.
Worse, I had just seen my measly super lose 20 per cent of its value in the global financial crisis years. When I needed it most, my money was tied up in risky financial assets instead of being in my bank account.
As my kids have grown, I can now see the other side of parenting. I can see that when they finish high school in a few years our expenses will plummet. Yet our household income will be at its highest point ever.
The super system attempts to solve a lifecycle income problem – in retirement we need to spend but don’t work, and not everyone has non-work income sources like financial assets. But we already solved this problem with a new non-work source of income, the age pension. In fact, for the bottom quarter of households, when they go on the age pension they get a pay rise!
The bigger income problem is that young families have their highest expenses in their lowest income years. We help solve this with parenting payments and child allowances. But compulsory super works against this, reducing incomes in those years while also reducing the gains to working.
In 2020, 4.5 million people took nearly $40 billion out of their super in the early release scheme. It was clear to these millions of people that having their own money today was better for them. And
I was one of them. That money helped me buy my own home and spend more on my family.
If the opportunity came up again, I would repeat the exercise. As I suspect millions of others would.
My parents’ generation has had access to their super for a decade. I watched many of that generation take huge losses on their super right before retirement.
I’ve seen others take their super as a lump sum and lose it all in financial scams, including honey traps. I’ve seen many spend big to qualify for the age pension.
Having super seemed to offer no protection for them from reliance on the age pension. Indeed, no one who has studied the super system thinks it will change reliance on the age pension much at all.
I’ve also seen many use their super to repay their mortgage or help their kids buy homes, or buy another investment property.
When you take a closer look, you see that super is already used to buy homes in a variety of ways. I had always had concerns that using super for housing would push up prices. But I came to see the reality is this is already happening.
In 2020, I had a health scare with suspected bowel cancer. I was only 38, but it is genetic. My father had a similar scare in his early 50s. What’s that got to do with super? Dead people don’t need super. One in 11 men don’t make it to age 60, and one in seven don’t make 66.
A happy life is not one where you can’t enjoy your money while you are young. It is a life in which you create great memories and social connections in your youth that stick with you when you are old, one in which you raise great children.
Luckily, I had my bowel partially removed and I am fine. But now more than ever I see that the best years of my life are this one and the next. My kids are only young once and if I die sooner rather than later, I want to have used my money to enjoy our time together to create the best childhood memories for them.
My personal experience motivated my economic research, which resulted in a report in 2020 arguing that we should scrap super, pay it as wages, and let everyone take their money out of their fund gradually to spend as they please.
Everyone who has looked closely and objectively at the super system finds that it doesn’t make the age pension more sustainable. In fact, it makes the situation worse. The tax breaks to super are nearly $40 billion a year, and nearly $30 billion a year is paid in fees. The whole age pension system costs only $45 billion per year. Without super and its associated tax breaks, the federal government could afford higher pensions.
Super also amplifies every financial inequality that exists, whether that is a gender pay gap, or any pay gap between workers and cities and towns. The age pension remedies all these gaps.
Loading
Even better than the Morrison government’s proposal of super-for-housing is super-for-anything — unwinding the super system altogether.
That wouldn’t mean people couldn’t save. They could. Just as they did before super.
It would just improve the budget, improve choice, improve fairness and improve the lifecycle of Australian families who need their money when they are young, not when they are old.
The only mystery is why our apparently left political party seems so intent on a high-fee privatised retirement system rather than boosting the only retirement system that actually works — the age pension.