A recent article by the libertarian think tank, the Centre for Independent Studies, made the “case for voluntary superannuation.”
Positing that “the evidence suggests that the single biggest factor in determining whether you will have a comfortable retirement is whether you own your home,” the article says “it is at least arguable that the decision to prioritise homeownership above superannuation is a logical one that should not be discouraged or prevented by law.”
Describing the super system as “paternalistic,” the article notes that “rules and regulations are piling up over time” which has led to what it describes as rigidity. This rigidity, it further says, contrasts with the “nature of work itself,” which “has become more and more flexible.”
Noting that the biggest change since the 1980s is the percentage of people working part-time, the article considers how shifting work dynamics may be incompatible with the design of the super system.
Based on the research, the article says that the “inescapable conclusion is that superannuation is not a good deal for everyone. There are three key issues, not all of which are directly caused by flaws in the architecture of the super system, that should make us rethink making super compulsory.”
These issues are increases in house prices and how increasing the superannuation guarantee may make it harder to save for a deposit; the rise in part-time work and how it can erode projected future super balances; and that “the super system does not reflect the savings patterns of lower income workers.”
“Inherent in the compulsory nature of super,” the article says, “is the idea that people’s saving and consumption choices are irrational, and so need to be corrected or people will under-save for retirement and live in old age poverty.”
The article concludes by saying that “a voluntary system, or at a minimum one that has a far higher threshold for compulsory participation, would give millennials and low income workers greater flexibility in their savings choices. This would be a welcome improvement to the current compulsory super system.”
