Superannuation: From privilege to right

By Aron Paul | 22 May 15

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

Article 25, Universal Declaration of Human Rights

Can the market be a vehicle for human rights? This has been one of the questions facing progressive politics, which historically divided liberals and socialists in answering yes or no respectively.

Pensions were once the preserve of the rich, originally conceived as gifts from the monarch to long-standing servants such as ministers. Towards the end of the nineteenth century, civil servants gained state-run superannuation schemes in the UK and some Australian colonies. Overwhelmingly, however, reliance on private provision meant that the majority of workers could not look forward to an independent and comfortable retirement.

Pension schemes in Australia

In Australia, following federation, the dream of dignity in retirement seemed on the brink of realisation with the legislation of means-tested pensions funded from the general revenue. This was the Invalid and Old Age Pensions Act passed by Alfred Deakin’s government in 1908. The state looked to be the guarantor of human freedom and equality. As a combination of the whole nation, the state would be far more effective a vehicle for this purpose than leaving it to individuals or mutual societies.

One of the enduring problems with Australian pensions, however, was the low rate and the lack of universal coverage. In the post-war era, as people lived longer, the cost on the state increased. Rising living costs outpaced the pension, so that pensioners reliant on state allowances often lived in poverty.

Oxford-educated Melbourne University professor Richard Downing played an important role in reframing superannuation as a human rights issue by arguing in his 1968 paper on the subject that a national superannuation scheme was a matter of “human dignity”.

Professor Downing noted that Australia’s retirement system, as provided, was a two-tiered system of an inadequate public pension supplemented by private savings and superannuation schemes. The coverage of the latter among salaried middle class professionals meant that “the major social issue is whether provision can be made, along these lines and better, for the whole working force instead of for only a privileged elite.” Downing’s argument for a “national superannuation” scheme was driven by his frustration at previous attempts to improve the amount and universality of the public pension.

From privilege to right

Gough Whitlam made “national superannuation” a part of his election platform, and after his reformist government came to power in 1972 it established the Hancock inquiry to recommend such a scheme. This inquiry did not report until after the Dismissal, when Fraser’s conservative government dismissed the idea of a national scheme. Leadership of the movement for a national scheme passed from government to the union movement, in particular the increasingly active Australian Council of Trade Unions (ACTU).

The union movement’s interest in superannuation arose out of concerns about equity in superannuation. It was also part of a paradigm shift away from the state to the market. As liberal economics experienced a resurgence, unions rediscovered their interest in mutualism and communal-level schemes that could provide for their members. A number of union-run superannuation schemes were already in the mix – but such instances were exceptions rather than the rule.

It is worth considering the picture of where we came from and the huge change that took place in reframing superannuation as a work right for all rather than a privilege for the few.

Thirty years ago, only four out of 10 Australian workers had superannuation. These were predominantly white-collar professionals whose employers had established a range of private superannuation schemes. Such schemes, however, could be abused by companies as a source of cheap capital rather than genuine retirement schemes. Vesting (the idea that moneys were owned by the individual worker) and Portability (the ability of the worker to take moneys with him when he changed employer) were not universally guaranteed.

That is to say, superannuation was viewed as a privilege, bestowed by the employer and remaining in the gift and control of employers. For women, the situation was even worse. Irregular workforce participation, lack of career advancement and simple discrimination at work meant that less than 25 per cent of women had any superannuation. Superannuation was very much the domain of the full time male professional, often a manager in white-collar and private sector industries.

The Accord

This was the picture that confronted the ACTU when it started its concerted campaign for a more universal and equitable superannuation system. The Accord with the Labor government in the 1980s made reform possible. Part of this historic agreement between the unions and government was that the unions would forgo wage increases to fight inflation, in exchange for more of a “social wage”. Wage increases would be linked to productivity increases.

In 1986, Labor joined with the ACTU in seeking a universal 3 per cent superannuation contribution by employers to be paid into an industry fund, in place of a wage rise. One of the important aspects of this reform was that superannuation was conceptualised as deferred wages – and as such the right and property of workers, rather than simply the gift of employers. It was no surprise then that employer groups fought the decision unsuccessfully in the High Court.

Subsequently, superannuation coverage increased to 72 per cent of the workforce. In 1992, the Keating government introduced the national superannuation guarantee, establishing the occupational superannuation system we have today.

Without the union movement and the Accord, the superannuation guarantee in Australia would never have happened. This was made possible by redefining superannuation from a privilege to a worker’s right.

Whether or not the superannuation system we have as a result itself has realised the right of all people to dignity in retirement is another question. There can be no doubt it has raised the prospects of many, but unfinished business remains over the equity of a system from which workers still benefit unevenly – for example in the case of women, the low-paid and the increasing casual workforce who often end up with less superannuation than salaried professionals.

Dr Aron Paul is a Melbourne based writer and historian currently researching the history of industry superannuation in the School of Management at RMIT.

Feature image: American Advisors Group/Flickr