Age-old problem

Superannuation has been a hot potato for more than 50 years. Why do we never get it right?

- Danyl McLauchlan

From an economic perspective, national superannuation is an unaffordable welfare benefit paid to the nation's wealthiest age demographics with no means testing, forecast to increase in cost by about a billion dollars a year in perpetuity: a lavish fiscal catastrophe. But from a political viewpoint, few people over the age of 50 regard superannuation as a benefit. Instead it's a pension scheme they've paid into their entire working lives, via their taxes. They've made profound financial decisions based on the state's commitment to provide for them in retirement, and any attempt to renege on that commitment would be a violation of the social contract, punishable by the annihilation of that government by millions of vengeful voters. Unfortunately, both of these perspectives are valid, leaving politicians with a looming disaster they cannot avoid but cannot solve.

The origins of the problem are the stuff of political legend. In 1975, Roger Douglas implemented a compulsory retirement savings scheme. Just months later, Robert Muldoon won the election by campaigning on the premise that Douglas was a communist, and killed his policy. He replaced it with universal super from age 60, depriving the country of an estimated $800 billion in foregone investment savings from the Douglas model, leaving us instead with a looming fiscal crisis.

The sheer unaffordability of Muldoon's scheme was always obvious, and its prospects grew worse as life expectancies rose and births declined: the long-term trend was an economy in which a smaller number of workers paid tax to finance a large population of retirees.

Over the 1990s, the Bolger government incrementally shifted the age of eligibility to 65.

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