Is the super system outdated?

mercer superannuation reform Millennials Array Ben Walsh Array

1 November 2018
| By Hannah Wootton |
image
image
expand image

The changing structure of the Australian workforce means that the superannuation system envisioned by Paul Keating with the super guarantee needs to modernise to better suit how people work nearly three decades later, a Mercer report released yesterday has found.

Speaking at the report’s launch, the Demographic Group’s Bernard Salt said that demographic shifts were reshaping the Australian workforce, and cultural change was needed to encourage gig workers to put super away, workers in their 40s and 50s to further train or retrain, and Millennials to engage more in their super in response to these movements.

When superannuation was introduced, for example, only 11 per cent of the population was aged over 65 and 73 per cent of workers were employed full-time. In the 2016 census however, 16 per cent of the population was over 65 and larger numbers are employed in working arrangements such as contract or part-time.

The report, which surveyed 80 executives and interviewed seven business leaders, found that 54 per cent expected to employ more contractors at the expense of permanent staff, while slightly over 60 per cent predicted an increase in part-time employees of both genders.

In the current superannuation system, these workers would largely go without superannuation guarantee payments, causing obvious concern for supporting retirees down the track.

Mercer chief executive, Ben Walsh, said that while these sorts of workers used to largely be people starting their own businesses, in which case the superannuation guarantee would have caused cashflow issues, the fact that much of the contractor workforce was now engaged in knowledge work meant that this approach needed updating.

The priorities of younger Australians when it comes to work also challenge the current superannuation system, with an increased emphasis on holding a variety of jobs meaning many had multiple super accounts.

Walsh pointed to the fact that 39 per cent of Australians have multiple super accounts, many of which he said were being diminished by fees, as one of the most startling statistics in the report.

In light of this demographic change, the report found that 36 per cent of employers believed that the super system was not suitably structured for the future workforce and 56 per cent agreed it needed adjustment.

Salt said that the push for reform could come from businesses: “I actually think the business community is ahead of society on the issue [of super reform]”, but that this thought needed to be translated into action.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 2 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 2 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

6 days ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

3 weeks 5 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

4 weeks 1 day ago