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Compulsory super - not so super duper

By Mirko Bagaric - posted Monday, 20 February 2006


The studies also show that overwork is also detrimental to wellbeing. The way to maximise the economic and psychological benefits from work is to spread out our working years, thereby facilitating a work-life balance during our entire adult life.

To the extent that the notion of retirement remains part of our terminology, it should be understood in an incremental sense. People should reduce their weekly hours from say 40 to 30 hours at the age of 60, then to 10 to 20 hours at age 65 and 4 to 10 hours thereafter. The overriding principle is that people should be encouraged to perform the amount of hours that are commensurate with their physical and mental capacity and the satisfaction and stimulation they derive from work.

The final reason that compulsory superannuation should be scrapped is because it is highly coercive. Workers have the right to enjoy the fruits of their labour and should not be forced to defer their spending and wellbeing. A system of forced savings is counter to notions of personal responsibility and offensive to the intellect of citizens.

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Coercive laws are only legitimate where the government can demonstrate that it will encourage compliance with fundamental moral norms that affect the wellbeing of others or where they will promote the welfare of each individual. This test has not been satisfied in relation to compulsory superannuation.

The superannuation experiment is flawed and should be halted before our market economy is distorted any further through the coercive funnelling of billions of dollars annually to an industry that does nothing to compete for our money.

All of the money currently in superannuation should be made available, now - or at least progressively over a period of five years - in order to prevent a huge injection of funds into the mainstream economy.

If we are allowed to access our superannuation, the cautious punter may still elect to leave the money exactly where it is and continue to make superannuation contributions at the same level. Others will withdraw their money and use it to repay their mortgages and car loans. Some will take the lead from George Best and “invest” it in fast cars, dinners and holiday, but so what, it is their money and presumably they will enjoy it - the notion of deferred happiness should not be taken to extremes.

If you decided to reduce your superannuation contributions, this does not necessarily mean that you will pay the price later in the form of having less to live on in your older years. Modelling which compares the efficacy of superannuation with other forms of investment is complex due to the large number of assumptions involved, such as the likely return of superannuation funds over a 30-year period and long-term inflation rates. However, a number of models suggest you will have more resources at retirement if you plough your extra hard earned cash into your mortgage (where most people effectively get a guaranteed 14 per cent return) than into the lap of a hungry fund manager.

Sounds too good to be true? Well, not this time - just look across the Tasman. New Zealand does not have an individual compulsory superannuation scheme. Rather, it has a non-means tested pension, available to all of its citizens regardless of their wealth. Is it any surprise that when in 1997 New Zealanders were asked to vote in a referendum on whether a superannuation scheme similar to Australia’s should be introduced, 92.8 per cent of the population voted against it?

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It’s about time our government allowed us a say regarding what we want do with our money.

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A version of this article was first published in The Age on February 2, 2006.



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About the Author

Mirko Bagaric, BA LLB(Hons) LLM PhD (Monash), is a Croatian born Australian based author and lawyer who writes on law and moral and political philosophy. He is dean of law at Swinburne University and author of Australian Human Rights Law.

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