It was thirty years ago today
When Superannuation came along to stay.

Do you remember 1992?

It was the year that one and two cent coins were taken out of circulation, the ground-breaking Mabo Decision recognised the pre-colonial land interests of Indigenous Australians, and the West Coast Eagles and Brisbane Broncos successfully wrangled the AFL and NRL premiership cups from their traditional heartlands of Victoria and NSW.

And on 1 July 1992, the Superannuation Guarantee (SG) came into force.

Saving for retirement in Australia 

Employer-based superannuation has been a feature of employment in some industries in Australia since the mid-1800s but was typically restricted to salaried employees in the public service and the financial sector. However, in 1987, new industrial awards required employers to contribute 3% of wages for award workers to superannuation. This increased superannuation coverage from 53% of employed persons in late 1982 to 71% by November 1991.

It wasn’t until the Keating government introduced the Super Guarantee (SG) Bill in 1992 that superannuation was extended to almost all employees.

Since then, the SG rate has grown from 3% to 10.5% as of today, 1 July 2022, and is scheduled to reach 12% over the next three years. As a result, since the introduction of compulsory super, Australia’s retirement savings have increased from around $146 billion in 1992 to, at the end of March 2022, $3,442 billion [1].

Looking back over the last 30 years, there is no doubt that the greatest achievement in Superannuation has been providing most Australians with retirement savings.

Funding retirement is more than just maximising your savings

Australia now has the fourth-largest pool of pension fund assets globally and our retirement income system is often rated as one of the best. But this does not mean we can pat ourselves on the back and expect our collective retirement dreams to be waiting for us at the end of our working days. The superannuation system as we know it was designed for a different time. The life events we described back in 1992 you would no doubt remember from newspapers and television broadcasts. A simpler time that preceded our modern, connected way of life and the medical advancements of the last thirty years. Changes need to be made to keep up with society today, our evolving work patterns, an ageing population and increases in life expectancy.

Since its creation, the superannuation industry has been obsessively focused on the accumulation phase. Whilst this might have been appropriate in the early years, developing solutions to help members live their best life after full-time work are long overdue, and we need to turn our attention to the retirement phase.

There is still work to do

A recent survey Optimum Pensions undertook probing the challenges that still lie ahead for Superannuation,  unearthed a variety of responses focused on helping Australians with manage their retirement funding.

There was also concern about maintaining the integrity of and trust in a system that needs to improve for Australians not in traditional, long-term employment including women, indigenous Australians, and self-employed or casual workers.

Overall, the Optimum Pensions team is encouraged that many in the industry are turning their attention to what happens to superannuation members after they leave full-time work and look forward to the next 30 years and beyond.

It’s a ‘Super’ kind of day

On 1 July, not only do we reflect on the 30th anniversary of compulsory superannuation, but now we can also look towards the future. This date marks the official commencement of the Retirement Income Covenant that requires trustees to have a retirement income strategy that sets out how they plan to assist their members in retirement. The strategy must consider how the trustee will assist their members to balance maximising their retirement income, managing risks, and having some flexible access to savings.

The superannuation industry plays an important role in the lives of all Australians, both as vehicles for them to save for retirement and as a large source of capital that can have a significant influence on the economy and society. As we step into the next phase of superannuation, and the industry as well as the aging Australian population slowly shifts their focus to retirement spending rather than saving, in the wise words of Professor Michael Drew – “If you think saving for retirement was hard, wait until you have to spend it”.

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For the Super Geeks -

Here are a few resources for those of you interested in finding out more about the introduction of SG in 1992.
- A Retirement Incomes Policy: an address by Paul Keating to the Australian Graduate School of Management, 1991 > https://bit.ly/OP_SG30a
- Treasurer John Dawkins introducing the bill in April 1992 > https://bit.ly/OP_SG30b
- Paul Keating in Question Time following the introduction of the SG legislation > https://bit.ly/OP_SG30c
- Second Report of the Senate Select Committee on Superannuation led by Nick Sherry > https://bit.ly/OP_SG30d
- Superannuation Guarantee (Administration) No. ,1992 > https://bit.ly/OP_SG30e

[1]  APRA Quarterly superannuation performance statistics, March 2022.

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Stephen’s Optima Pensions

Optimum Pensions was launched in 2017 with a single mission – to help Australians lead a comfortable retirement. The Optimum Pensions innovative retirement income solutions are specifically developed to address longevity risk and provide greater peace of mind for all retirees; no matter how long they live.

The Optimum Pensions, award-winning LifeSpan Calculator builds confidence around personal life expectancy and retirees’ possible retirement planning horizon.