Suddenly, superannuation has become a hot-button issue in Australia.

Germany was the first modern state to introduce old-age pensions. That was in 1889 when Bismarck required all employees to contribute to funding their retirement incomes.

Australia and Britain introduced means-tested but non-contributory pensions in 1908. Britain’s was shifted to a (partial) contributory basis in 1925. In principle, Australia began moving to a fully contributory scheme in 1992.

Virtually all but the poorest of countries now have some form of old age pension.

Most nations’ schemes are funded out of general taxation. Singapore, Hong Kong, Mexico, Switzerland, Denmark, and Israel, like Australia, are among the few with compulsory superannuation designed to ensure the beneficiaries, not the next generation of workers, pay for it. Even in Australia, some 56 to 66 per cent (depending on definitions) of retirees currently receive a state pension funded from general taxation.

When the Hawke-Keating government introduced compulsory superannuation in 1992, superannuation covered only about 30 per cent of private sector employees, mainly at a lower rate than the current 12 per cent (the rate was staged to increase from its initial 3 or 4 per cent). Compulsory superannuation was controversial when it was introduced; conservatives like John Howard and Tony Abbott opposed it on the grounds that it ran counter to freedom of choice. In addition, there were concerns that, with union appointees dominating industry super funds they may invest unwisely and (as has eventuated) cream off income to provide an income stream for the Labor Party.

The funds now have assets of $4 trillion – considerably greater than Australia’s annual income.

Superannuation funds will always be hostage to socialistic governments that see themselves as better at directing investment than individuals and wealth-oriented managers. But few at the time of the policy’s introduction raised concerns that funds would be directed toward investment areas favoured by the government itself. Recently, the Albanese government and former Victorian Premier Jacinta Allen floated such an option. Political allocation of funds would have adverse consequences for the income stream.

Industry super funds have placed financial pressure on firms they invest in to adopt Diversity, Equity, and Inclusion (DEI) policies – especially decarbonisation. Adopting such policies will generally adversely affect profitability. One Nation recognised this as a political risk with union-dominated superannuation funds, though private funds led by BlackRock and State Street have also adopted such policy; funds pressing DEI have tended to underperform their competitors, and many have abandoned it.

Having initially opposed compulsory superannuation, the Coalition came to accept it as settled policy, though in government it has occasionally delayed the staged increases.

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