Super Blooper? Time to halt the superannuation juggernaut?

The superannuation industry has increased almost exponentially in Australia over the past decade. The main reason for this is because government  regulation compels employers to pay a fixed portion of employees’ salary  towards superannuation. In this article we suggest that the unremitting  government policy of coercing money towards superannuation is flawed. Superannuation is wrong at two levels. First, on an economic analysis, the evidence does not suggest that (i) individuals who invest in superannuation are necessarily better off than those who apply their income elsewhere; and (ii) there is no evidence that absent a coercive superannuation scheme the government will be unable to sustain people into their old age. Second, at the human and societal level, studies of human well-being show that coercing people to make spending decisions is inimical to human happiness. People flourish best when they are in control of their activities, including their finances. Left to their own devices, many people will not save for a rainy day; however, on balance it is probably better off to be a bit poorer in retirement than to have been deprived of the opportunity to spend 9% of one’s income over the period of one’s working life – when one’s needs are the greatest. Compulsory superannuation should be abolished. Money currently paid as a compulsory superannuation contribution should instead be paid to the employee as a salary.