The end of 2024 marks the 25th year I’ve written about superannuation for Newsmonth.
Originally titled “Absolutely super”, these articles have provided general information on legislative changes, investments, insurance and how super works. It has given me great satisfaction to assist IEU members to understand Australia’s world-class superannuation system and to watch it grow to its current $3.9 trillion under management for the benefit of Australian workers. A real Aussie achievement!
Think of it: from 1 June 2025, compulsory employer contributions are moving up to 12% of gross salary in a highly regulated system controlled by government agencies and outsourced to experts under the watchful eyes of regulators and trustees.
For the boards of industry super funds, there is an “equal representation” rule of 50 per cent employer and 50 per cent member-appointed directors who all work for members’ best interest. Super has also reduced the pressure on the age pension for future generations and has assisted members to enjoy a dignified retirement.
It is impossible to outline all the changes and improvements made to super over the past 25 years in a single column, so here are a few basic points about the growth of super and industry funds.
Investments and contributions
Compulsory super contributions started in 1992 at 3% of gross salary and were gradually increased over the following years with an aim of reaching the planned 12% that is considered “adequate” for a dignified retirement over a working life. There were some roadblocks along the way with a delay in the legislated increases caused by government intervention.
In the early days, industry funds offered only a limited choice of investments, such as “Growth”, “Defensive” and “Cash”. Over time, the investment palette grew, with additions such as “Balanced”, “Property”, “Socially Responsible Investment”, “Shares” (both Australian and International) “Diversified”, “Fixed Interest”, “Infrastructure” and many other investment choices.
Of course, investment options can be mixed. Industry super fund members now have a wide choice of investment options according to their risk profile, although many have elected to remain in the default option which is selected by the fund trustee.
Government incentives such as the tax concession for salary sacrifice contributions (up to the limit), the co-contribution and superannuation paid on parental leave were also put in place to encourage members to save for their retirement.
Insurance
In the early days of industry super, insurance was basic. Many funds had a default, automatic death and total and permanent disability group life policy only.
A common cost for this cover then was $1 per week and the cover was age-based. The automatic cover reduced as the member grew older. Industry fund trustees considered that default insurance was in the best interest of most members and insurance through super provided reduced some of the problem of underinsurance in Australia.
As with the growth of investment options, insurance has expanded to include many more options for the benefit of fund members. Due to the large size of many funds, group insurance is provided to members at wholesale rates.
Income protection insurance for temporary incapacity is now included as a default for many funds, and members can dial up or dial down their insurance cover depending on their life situation, subject to acceptance by the insurer.
Insurance can also be cancelled completely. Many funds now offer fixed cover which means a member may choose to keep a certain level of cover for life subject to premium increases every year, and again, on acceptance by the insurer.
Group cover has provided a genuine benefit for members and their dependants in times of illness or death and has helped many Australian families.
Income stream
Government incentives continue to encourage fund members to access their super as a regular income stream replacing their salary at retirement. This will no doubt be further developed as account balances grow and a large number of members retire from the workforce.
Funds invested in the income stream are tax-free and perform according to the choice of the individual member. It is also likely that new products, such as guaranteed life annuities, will be introduced in the future to provide further security in the knowledge that the income is in place for life.
Fortunately, members entering the workforce after 1 July 2025 will enjoy the full benefit of a 12% employer contribution.
So let’s sing a song of super! It’s been a great innovation for fund members for Australia.
And happy holidays to you.