Over 20 years ago, Australia’s Federal Government introduced the Superannuation Guarantee requirements, an obligation on employers to direct a part of each employee’s remuneration to a superannuation fund. The objectives of the SG were never annunciated. As a result, nobody really knows what the purpose of the SG is. Of course, people will explain what they think its purpose is. But given that different people will explain its purpose differently and given that there is never-ending debate about whether the minimum rate of contribution is too high, too low or about right, it is clear that the SG system has no generally understood and accepted objective.
That means we don’t know how well it is doing precisely because it is impossible to know what it is meant to be doing. We can’t determine if 9% is the right rate of contribution, because we don’t know what it is meant to achieve.
Two aspects of the SG that are clear: it forces a redirection of labour remuneration from cash to a savings vehicle and ties up those savings until retirement and the deferred cash can then be taken and spent in an afternoon if the beneficiary so decides. Apart from that, not much else is known about why it exists.
Strangely, this system is viewed favourably by some. How can anyone decide whether it is a good system without knowing what it is trying to achieve?