Australia's first pension plans were established in 1857 by the Australian Mutual Provident Society (now known as AMP) and in 1885 they set up one of the first staff pension funds in the world.
Since then the super savings pool has grown to almost $3 trillion, being one and a half times the size of Australia's entire economy. Superannuation is now well on its way to becoming the biggest investment pool Australia will ever see.
Australians are getting older. We are living longer and are having fewer children. The problem is that as we are getting older there will be fewer taxpayers to pay the taxes that will fund our aged pensions. The problem is so extreme that the government forecasts that by mid this century Australia will have almost 40 million people with just three taxpayers supporting each retiree compared to almost five per retiree today.
To help pay for us in our greying years, the government has been trying to encourage us to save for our retirement through superannuation using incentives such as promising to increase compulsory contributions paid by employers from nine to 12% (it is now 9.5%) and giving us tax concessions on our superannuation contributions, investment earnings and end benefit payments.
Making this challenge ever more daunting, Australians retiring in future years will want a higher standard of living and a more sophisticated retirement lifestyle than any previous generation of retirees. The 2008 global financial crisis and increasing levels of government debt just added to these pressures.
Superannuation is also important to just about every employer as nearly a tenth of their payroll goes into superannuation each year. For some generous employers, these super contributions are even higher. Little wonder we all talk about super so much even though we claim to be disinterested in it.
These forces are so strong that the modern superannuation industry that has grown out of these incentives usually doubles every five years or so. It's even projected by Rainmaker Information to climb to $10 trillion within the next 20 years to become the biggest savings pool Australia has ever seen.
Superannuation has, however, changed tremendously since its early days when private pensions were paid only to senior, long serving permanent staff in large private companies and government departments.
In those days superannuation was predominantly held by white-collar males and most superannuation funds were defined benefit, meaning your retirement benefit was determined by your age, how long you were with the same employer and what your final salary was when you retired.
But all that changed in the 1980s when as part of the National Wage Case, the government supported the ACTU in its claim before the Arbitration Commission for a 3% productivity payment to be paid to all Australian Workers in the form of Award Superannuation. This was the spur that saw superannuation smash down barriers like gender discrimination to include many millions more workers such as women, the low paid and those who weren't employed by large companies or the public sector.
At last count more than 95% of Australian workers, being about 13 million people now, have superannuation, more than twice the proportion of 20 years ago when only about six million people had superannuation.
This transformation of superannuation is so complete it is a major feature of most industrial awards, especially following the latest review of awards following the government's Fair Work legislation and Award Modernisation program.
But as far as superannuation has come it remains a work in progress as governments continually reform it and the industry itself strives to become more efficient, more tech-savvy and deliver better investment outcomes for lower fees. This makes superannuation so big and important that it is quite literally the centrepiece of every Australian's long term financial plan.
|Timeline of superannuation in Australia|
|1857s||AMP begins offered pension savings plans.|
|1890||State Age Pension Schemes introduced.|
|1909||Commonwealth Pension Scheme (Aged Pension).|
|1950s||Super restricted to permanent male executives.|
|1960s||Tax concessions for the self-employed.|
|Late 1970s||LUCRF Australia's first industry fund opens.|
|Early 1980s||Start of productivity bonuses in awards spurs emergence of more industry funds. 1987 Arbitration Commission supports Award Super.|
|1991||Superannuation Guarantee legislation becomes law.|
|1990s||Member Investment Choice introduced.|
|1996||Government proposes super fund members be given the right to choose which super fund they should join.|
|2000s||Compliance overload prompts many employers to outsource their in-house corporate super funds to either master trusts or industry funds.|
|2003||Introduction of Financial Sector Reform Act.|
|2004||Trustee licensing introduced, disclosure rules toughened. Choice of super fund legislation passed.|
|2005||Super choice comes into effect on July 1.|
|2006||Super choice extended to cover state awards. Simpler Super reforms introduced into Parliament.|
|2007||Better Super reforms become law and super is now largely tax-free for people aged 60 or over, causing contributions to double. The amount of money that pours into self-managed super fund breaks all records.|
|2008||Super funds allowed to offer First Home Saver Accounts. Sub-prime crisis in US causes global financial crisis (GFC).|
|2009||Government increases age pension rates to supplement low super balances that have been hit by the GFC, reduces the amount of concessionally-taxed contributions workers can make to their super, and allows super funds to offer intra-fund financial advice.|
|2010||Rudd government completes major reviews of the superannuation system and proposes increasing the SG rate to 12%.|
|2011||Government announces MySuper and Future of Financial Advice (FOFA) reforms.|
|2012||My Super and financial adviser reform laws enacted|
|2013||MySuper starts. FOFA starts.|
|2014||Default SG contributions can only go into MySuper products.|
|2017||$1.6 million pension transfer cap and $100,000 lifetime non-concessional contribution cap introduced.
Low Income Superannuation Tax Offset scheme re-introduced.
|2018||Royal Commission into banking, financial services and superannuation. Productivity Commission releases a major report calling for changes to default super arrangements.|
|2019||Protecting Your Super legislation introduction that caps fees at 3% and stops super funds charging members for insurance they can't claim against.|
|2020||The COVID-19 pandemic breaks out around the world. Super funds suffer their first negative returns since the GFC and the government passes special laws to let people withdraw up to $20,000 in super.|
|2021||Parliament passes the Your Future, Your Super legislation that introduces MySuper stapling, the annual super fund performance test and toughens the obligations on trustees to act in the best interests of members.
Laws are passed that make it compulsory for all super funds to declare the specific investments they hold.
|2022||All employees are now eligible to receive SG contributions regardless of how much, or how little, they earn.|
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