In Australia’s superannuation scheme, everyone’s a winner
May 26th 2011 | from the print edition
TWENTY YEARS OF reform in Australia did not roll off without resistance, so sweeteners were needed to buy off opposition. One of the most inspired was superannuation, a long word meaning private pension provision that the all-abbreviating Aussies call their “super”. Used in the 1970s and 1980s to please trade unionists (and helping to keep a lid on inflation), it has turned into the financial equivalent of the Swiss army knife, with a multiplicity of benefits.
In 1992 the Keating government made it mandatory for employers to pay a proportion of the wages of all but the very lowest-paid workers into a superannuation account. The payment, which was tax-deductible, was to rise in annual steps to 9%, where it is today, though by 2019 it should be 12%. Employees choose the funds that receive their payments.
The upshot is that most Australian workers, over 8m in total, now have a private nest-egg for their old age. No tax is paid when members withdraw from their fund; they can take all they want as a lump sum, subject to a limit, or buy an annuity. Aussies are now a nation of capitalists.