A trip through superannuation history
Did you know the origins of super can be traced to the late 19th century? To understand the super system better, we take a step back in time.
Superannuation may have started as an exclusive benefit for the staff of major financial institutions back in 1862 but today it has become an important part of our lives. Super is a way of saving through your working years for the time when you’re no longer working full-time or at all – retirement.
With the government trying to cut back costs and Australians living longer, super has become increasingly more talked about. For those Aussies still working, it pays to understand how super works and how it can be used to their advantage. However, research shows that many of us don’t actually understand it all that well. To help in that area, we’re going to take a trip back through history to understand superannuation’s story and to give you a bigger picture view of why super is vitally important today.
Employees of the Bank of New South Wales (now Westpac) were the first to have a form of superannuation. The year was 1862. That’s 130 years before the Keating government introduced the Superannuation Guarantee (SG) in 1992. The SG legislation requires most employers to pay a minimum of 9.25 per cent (9.5 per cent from July 1, 2014) of the employee’s ordinary time earnings as super. Since the late 1800s, the super savings pool is well on its way to becoming the biggest investment pool Australia will ever see. It’s projected to reach $8 trillion in 20 years.
While widespread super arrangements had been in place before 1992, it wasn’t until the Keating government’s landmark decision introducing the compulsory SG system which really pushed the industry along. The decision was part of a major reform package addressing Australia’s retirement income policies.
The super contribution was originally set at 3 per cent but has been gradually increased by the Australian government. It will eventually rise to 12 per cent by July 2020. Below we take a look at super through the years.
From 1860s to 1940s
During what’s seen as the first era of superannuation in Australia, it’s only a select group of salaried employees who have an independent retirement income. An income stream separate from the age pension, which the NSW government introduced in 1900. The pension for a single person back then was £26 per year and means tested against property and income to make sure it only went to the most in need.
From 1950s to 1970s
After 1945 superannuation became more recognised as a desirable employee benefit but remained skewed to white-collar workers. During this time there was a relaxation of means test arrangements so super became a way to supplement the age pension.
From 1970s to 1990s
During these years super was an employment fringe benefit which became more widely available. However, it was still concentrated among professionals, managers and administrators, public sector employees and those working in the financial sector. By 1974, 32.2 per cent of wage and salary earners were covered by super. In 1989, super coverage increased to 79 per cent of employees and then the SG is introduced in 1992. Employers were now required to make tax-deductible super contributions on behalf of their employees.
Since then super has continued to undergo a number of changes. What differs about super today is the importance now placed on it as a major part of planning for the future. There are a variety of funds to choose from as well as the option of managing your own super fund. As Aussies get older and live longer, it has become more apparent the government is looking for people to take more control of their own financial future.
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