Australians are constantly told that superannuation is ‘their money’. They can choose a fund, switch providers, consolidate accounts, or run a self-managed fund. Yet they cannot access a cent until they satisfy a condition of release.
That restriction has always been part of a bargain. Super receives generous tax concessions because it is intended to provide income in retirement. Australians accept limits on access in exchange for those concessions and decades of compound growth.
Fair enough.
But Jim Chalmers now says the next election will be a referendum on superannuation, which makes it worth asking what exactly we would be voting on. Because politicians across the spectrum increasingly talk about super as though it belongs to everyone except the people who earned it.
Anthony Albanese has described Australia’s superannuation pool, now roughly $4.5 trillion, as a ‘national asset’ that can serve not only for retirees but the nation as a whole. Chalmers has spoken about the role super can play in housing and the energy transition. Former Victorian premiers Daniel Andrews and Jacinta Allan have nominated housing, infrastructure, energy, water security, pandemic preparedness, schools, and hospitals as worthy destinations for super capital.
Australia’s retirement savings are being discussed less as private retirement assets and more as a vast national balance sheet waiting to be deployed.
Super funds should invest wherever they can achieve strong returns for members. The concern arises when politicians begin viewing workers’ retirement savings as a pool of capital available to advance government priorities.
And that pool is concentrating. Nine funds now manage more than $100 billion each. On paper, the money belongs to millions of Australians. In practice, investment decisions are made by a handful of large institutions, run by trustees almost no member could name. How much of the economy do we want that handful to own?
Politicians talk about deploying super into national priorities as though it were something other than private capital. Yet that is precisely what super funds are: enormous private financial institutions managing trillions on behalf of members rather than shareholders.
Call it what it is – a capitalist utopia. Vast pools of private capital owning larger slices of the nation’s housing, energy, transport, health, and education assets. It is a curious vision, particularly when its strongest advocates come from a political tradition historically wary of concentrated private economic power.
The Coalition’s approach points in a different direction but suffers from the same underlying flaw. Allowing first-home buyers to withdraw up to $50,000 or 40 per cent of their balance for a housing deposit was sold as empowerment. In reality, it asks young Australians to solve one problem by creating another.
Those most likely to use such a scheme are those with the smallest balances and the longest investment horizons. Withdrawals in early adulthood sacrifice decades of compound growth; the Coalition’s own repayment condition is a tacit acknowledgement of the cost. Nor is there much reason to believe the policy would improve affordability. In a market constrained by supply, increasing buyers’ purchasing power tends to push prices higher.
Pauline Hanson has gone further, arguing that Australians should be able to draw on their balances for mortgages, medical costs, and cost-of-living pressure. Her reasoning deserves attention. It is their money, she says, and they sacrificed it in lieu of pay. She is right about that much. But whether the objective is buying a home, paying the bills, or funding government priorities, superannuation is increasingly treated as the solution to problems it was never designed to solve.
The Retirement Income Review, commissioned by a Coalition government in 2019, drew the line explicitly. Superannuation exists to deliver retirement outcomes, not to address the difficulties people encounter during their working lives. The review allowed that genuine emergencies might justify early release, while warning that early release falls hardest on the young.
The deeper problem is that all of these proposals rewrite the original bargain. Australians receive favourable tax treatment because the money is preserved. The concession and the preservation rule are inseparable; weaken one and the justification for the other weakens with it. Once super becomes available whenever housing affordability deteriorates, living costs rise, or governments need capital for their preferred projects, the bargain has already broken down.
If Australians need greater flexibility, there is a more honest answer than inventing endless new exceptions.
The Superannuation Guarantee now stands at 12 per cent. Employers technically make the contribution, but it is not free money. The Retirement Income Review took the view, on the weight of the evidence, that increases in the SG rate ‘result in lower wages growth, and would affect living standards in working life’. Compulsory super is deferred pay. Workers fund it.
So why not make six per cent compulsory and leave the other six voluntary?
The precise split is not the point. Ten and two, or eight and four, would serve the argument equally well. What matters is the principle. The remaining portion would be paid as salary unless the worker directed it to super. Every worker would therefore receive an increase in take-home pay unless they chose to contribute it. Those who value the tax benefits and long-term compounding could salary-sacrifice the full amount, or more. Those facing high mortgage repayments, rising rents or other pressures could keep the money. Most importantly, the choice would belong to them.
This is not the same as raiding a balance. The Coalition’s scheme allowed a worker to take the tax concession and then take the money out. Under this proposal, money taken as wages is taxed as wages. There is no concession, so there is no bargain to breach. Preservation remains absolute for every dollar that enters the system.
The obvious objection is that compulsion exists because people cannot be trusted to save, and that taxpayers wear the cost when they do not. It was the right argument in 1992, when most workers had no super at all. It is a weaker one against a system holding $4.5 trillion. The question is no longer whether Australians save. It is whether the last 6 per cent must be compelled.
None of this is an argument against superannuation. Australia’s system has been a remarkable success. It has improved retirement incomes, reduced pressure on the Age Pension, and created one of the world’s largest pools of long-term savings. Nor is it a proposal to unlock anyone’s balance. Senator Hanson is right that super is deferred pay, and wrong about what follows from it. The answer to money being forgone wages is not to raid what has already been set aside. It is to stop setting quite so much of it aside without asking.
If politicians genuinely believe super belongs to its members, they should trust those members with greater choice.
The current debate has settled into two equally flawed camps. One wants to redirect retirement savings towards national priorities. The other wants to expand access to those savings to solve today’s problems. Both erode the principle that made superannuation work in the first place.
Australians should be able to look at their super balance and know exactly what it is: money set aside for retirement in exchange for tax concessions. If they need more flexibility, the answer is not another withdrawal scheme. It is allowing them to choose whether part of their earnings is locked away at all.
After all, if super is really our money, surely we can be trusted to decide what happens to the second six per cent. And if we cannot be trusted with that choice, perhaps we should stop pretending it is our money in the first place.
Chris Cornish is an independent financial planner and finance commentator.
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