Let’s talk: Is our retirement system a super big fail?

The Australian reported today that despite the introduction of compulsory superannuation 25 years ago, a whopping 80 per cent of people are retiring onto at least a part Aged Pension. 

Given the Keating government’s whole purpose in making superannuation contributions compulsory back in 1992 was to ensure people had enough money set aside to provide an income in retirement, and importantly, independence from relying on government benefits, does this mean our retirement system is a failure?

Under the current super system, Australia is the fourth largest holder of pension fund assets in the world. 

To qualify for a part pension, the maximum investment assets a home-owning couple may hold is $827,000, while for non-home-owning couples, the cutoff is $1.03m, and this follows the Turnbull government significantly tightening the asset test this year. 

According to the 2015 Melbourne Mercer Global Pension Index, Australia is ranked at number three for the top retirement systems in the world, beaten only by Denmark and the Netherlands. 

In contrast to Australia’s retirement system of income-tied, age-based pensions funded by the government, mandatory contributions from employers into a private fund, and voluntary contributions into a private retirement fund, the world leader in retirement, Denmark, has a public basic pension scheme, a supplementary pension benefit tied to income, a fully funded defined-contribution plan, and mandatory occupational schemes.

The reader comments on The Australian‘s article are scathing of the superannuation scheme. 

“What a mess our politicians have made,” one commenter wrote. 

“I suppose it is little wonder when so many in the Senate would be battling to pass an IQ test.”

“Another government initiated policy disaster. You just sit back and leave the responsibility for your life to us,” another said. 

While there were others who seem to think that the fault lies with the user, not the system. 

“You have about 45 years as an adult to do something about your retirement. Don’t blame everyone else for failing. It’s your fault.”

“It’s simple, too many people wear it like a badge of honour to ‘receive part or full pension’ when with good and sensible financial decisions in their working life they should not be rewarded with a life time of access to their snout in the trough because they have been poor money managers.”

What do you think – is our retirement system broken, or is it working okay for you?