Superannuation
The Australian Economic Review, vol. 37, no. 2, pp. 184–90
Policy Forum: Long-Term Issues in Superannuation Why Is Superannuation Compulsory?
M. E. Drew and J. D. Stanford School of Economics and Finance, Queensland University of Technology; and School of Economics, The University of Queensland, respectively
1.
Introduction
Nearly all employees in Australia are now covered by superannuation and superannuation accounts for a significant proportion of household wealth. The expansion of superannuation has come as a result of decisions to make superannuation contributions compulsory. The major policy decision for compulsory superannuation was the introduction of the Superannuation Guarantee (SG) in 1992. It provided a pecuniary penalty, the Superannuation Guarantee Charge (SGC), for employers who failed to make prescribed payments on behalf of employees to a superannuation fund. The SG system reached maturity in 2002 when the prescribed percentage reached 9 per cent. Earlier decisions in the 1980s, initiated by trade union pressure and the Labor Government Accord, saw the introduction of award superannuation under which an amount equivalent to 3 per cent of wages and salaries was paid to a superannuation fund as specified in the relevant industrial award. The SG and award superannuation were an overlay to existing occupational superannuation schemes, many of which required employees to contribute to superannuation as a condition of employment, usually with a copayment by employers. Within the superannuation system there are other elements of compulsion, including contributions by, and on behalf of, employees are placed in a fund selected by employers, and accumulated balances in superannuation funds cannot be transferred by employees. These strands of compulsion add up to a substantial constraint on the ability of employees
to allocate their income between consumption and saving and to allocate their wealth between different types of assets. They stand in stark
Policy Forum: Long-Term Issues in Superannuation Why Is Superannuation Compulsory?
M. E. Drew and J. D. Stanford School of Economics and Finance, Queensland University of Technology; and School of Economics, The University of Queensland, respectively
1.
Introduction
Nearly all employees in Australia are now covered by superannuation and superannuation accounts for a significant proportion of household wealth. The expansion of superannuation has come as a result of decisions to make superannuation contributions compulsory. The major policy decision for compulsory superannuation was the introduction of the Superannuation Guarantee (SG) in 1992. It provided a pecuniary penalty, the Superannuation Guarantee Charge (SGC), for employers who failed to make prescribed payments on behalf of employees to a superannuation fund. The SG system reached maturity in 2002 when the prescribed percentage reached 9 per cent. Earlier decisions in the 1980s, initiated by trade union pressure and the Labor Government Accord, saw the introduction of award superannuation under which an amount equivalent to 3 per cent of wages and salaries was paid to a superannuation fund as specified in the relevant industrial award. The SG and award superannuation were an overlay to existing occupational superannuation schemes, many of which required employees to contribute to superannuation as a condition of employment, usually with a copayment by employers. Within the superannuation system there are other elements of compulsion, including contributions by, and on behalf of, employees are placed in a fund selected by employers, and accumulated balances in superannuation funds cannot be transferred by employees. These strands of compulsion add up to a substantial constraint on the ability of employees
to allocate their income between consumption and saving and to allocate their wealth between different types of assets. They stand in stark
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