Comment by djrobstep | Hacker News Reader

Comment by djrobstep | Hacker News Reader

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In Australia this situation has reached whole new extremes.

Retirement funds are huge because a compulsory 10% of all wages must be invested in a retirement ("superannuation") fund, not able to be spent until retirement age. The total savings is over $3 trillion, and annual fees each year amount of ~2% of GDP (twice what Australia spends on electricity each year, and nearly as much as the military budget).

Oddly enough, it's unions and the Labor party themselves who set up this arrangement, during a neoliberal phase in the 90s.

Ostensibly, it was supposed to give workers secure retirements, but it's simply replicated the inequality of the labor market, and left the poorest people with the lowest balances (elderly women are now the most impoverished demographic in Australia, mostly due to these privatized pensions).

So it's failed to fix poverty, failed to provide secure retirements, lowered spendable wages for every working age Australian - not to mention invested in anti-worker companies and participated in privatization as discussed in the article above.

Sadly, the Labor party still defends the scheme, due to being unwilling to admit that one of their flagship projects was a mistake.

Total hog wash.

Superannuation is one of the best piece of gov't policy ever conceived, with the exception of probably free public education.

It has made australians one of the richest in the world. It has allowed people who would otherwise squander their savings to have investments that they can live off in their retirement.

I do agree that some superannuation providers are price gauging on unsuspecting customers - but realistically, these people should have known better, and shop around. Good industry-run super providers are very cheap and cost effective, and generate at least market returns.

The problem of inequality or poverty for people with low balances in their super is not something that this policy aims to solve. There will always be people in situations where they are unable to contribute. That's why the pension system exists - a final safety net.

Super is not a mistake at all, and I'm very glad that this policy is instituted for australians. They would've been very much poorer over all, had it not been done.

None of what you say is true.

> It has made australians one of the richest in the world.

Which Australians? It's certainly helped already rich Australians dodge taxes, if that's what you mean?

> It has allowed people who would otherwise squander their savings to have investments that they can live off in their retirement.

Why not force people to save 100% of their incomes, if all spending is simply squandering? If you want to increase savings, there are much better ways to do it (Norway's SWF for instance). The idea that a minimum wage worker would be saving 10% of their income instead of putting food on the table is crazy. Lowering the spendable wages of already low paid workers by a further 10% is a terrible thing to do.

> Good industry-run super providers are very cheap and cost effective, and generate at least market returns.

Even "good" industry funds have fees ~20x higher per invested dollar than Norway's SWF, and performance no better than a basic index-following approach with a fraction of the fees.

> The problem of inequality or poverty for people with low balances in their super is not something that this policy aims to solve.

Wrong - Labor and the union movement claim it's about security and dignity in retirement. Of course, Keating's real goal was to privatize a core function of the welfare state, and provide a tax dodge for the rich.

> There will always be people in situations where they are unable to contribute. That's why the pension system exists - a final safety net.

That would make sense if the pension was anywhere near the poverty line - it isn't. And if the pension is there to provide security in retirement... what is super for?

> They would've been very much poorer over all, had it not been done.

Ask elderly women living in homeless shelters how rich they feel thanks to super and a pension that isn't enough to afford food and shelter.

Keating could have set up super to create a Norway-style SWF that funded above-poverty-line pensions for all. But he chose not to because his goal was privatization and the gutting the welfare state.

Australia's super is a good idea and other countries, eg Sweden, have very similar systems.

Unfortunately and unsurprisingly the industry is fleecing everyone, but the idea itself isn't bad.

I agree that rather than a blanket 10% for everyone, it would be better if there was some redistribution involved, such that parts of the super from higher earners was redistributed to lower earners and helped grow their balance.

Economists universally agree that super gains shouldn't be taxed at all, for very good reason. If you want to tax rich people, tax rich people. Don't harm everyone else by imposing taxes on them (which, as you point out, disproportionately affect them vs the already wealthy)

Superannuation is essentially a payroll tax. As you suggest, many countries have these.

Whether they are good or not depends what you do with the money after it is collected.

In the case of super it's "put it in a special account for an individual where they can't spend it until retirement".

Much better would be "put it in a massive Norway-style fund, and use it to fund above-poverty-line welfare for all".

Skeptical that super gains shouldn't be taxed highly - a broad, universal welfare state means everybody needs to be contributing, not just the rich (of course, those at the bottom of the pyramid net benefit through the consequent redistribution).

> Superannuation is essentially a payroll tax.

Isn't the whole point that it's not a payroll tax? Ie instead of the government getting and using the super money to fund its activities (whether they be welfare or what have you), the money remains the individuals own, just forcibly saved in what should be cheap or free index funds, but in many cases unfortunately isn't.

I guess a halfway point would be for government to get the money, but rather than using it to fund its activities, the money is pooled and invested and then that money is given out to fund retirement according to need down the track? Is that what you're referring to?

> Skeptical that super gains shouldn't be taxed highly - a broad, universal welfare state means everybody needs to be contributing

But that's the thing, it kind of doesn't and economists have been pointing that out for decades. Economists across the political spectrum agree that pretty much all taxes, including payroll, capital gains, stamp duty etc etc be completely abolished for everyone and replaced with taxes on wealth, carbon, consumption etc etc instead. But that will never happen, because people don't get it and neither do politicians.

These mandatory pension plans exist in several countries. They are a good idea in themselves, but they often provide governments an excuse not pay decent direct benefits to the elderly. So many people are not able participate in the workforce for the decades necessary to profit from these plans.

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