From employee to investor

The importance of superannuation has changed immeasurably in the last two decades. Although it has been available in Australia for well over a century superannuation has changed from a not widely available form of investment to augment the aged pension to a compulsory form of locked-up savings for retirement contributed to through the employment system by over 90 per cent of the Australian population. Australia does not have a social security levy; instead it has a superannuation guarantee charge which requires employers to contribute a minimum of 9 per cent of employees' salary into a ‘complying’ superannuation fund. Employees may choose which superannuation fund receives their entitlements.

The broad aim of public policy is that retirees should not be dependent on government-funded aged pensions and that superannuation savings should be increased and protected. There is no current crisis in funding pensions (even with the decline in the share market) but government is looking to the future, and recognises the age profile in Australia, the future ratio of retirees to workers, expected pressure on the pension as the current workers, and particularly baby-boomers, age, and the reality that even the mandatory superannuation guarantee contribution, contrary to the expectations of many, will be inadequate to fully fund retirement. The result of policies of successive governments which moved beyond the taxation advantages which had been the attraction of superannuation trusts for many years to superannuation as an aspect of most Australians' salary arrangements is that each person with funds invested in superannuation is an investor in a financial product, and is exposed to all the risks that come with investment.