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A brief history of superannuation in Australia

Superannuation is a part of every working Australian’s life, and it plays a more important role as we grow older and inch closer to retirement. But its history and background are still unknown to many of us.

In fact, according to a recent survey of more than 1,000 Australians, only one in 10 are actively engaged with their super.1

A lot of people consider superannuation to be a ‘set-and-forget’ scenario, or too complex to get involved in. But if you have this mindset, you could be missing an opportunity to better your financial situation and set yourself up comfortably for retirement.

So, let’s start from the beginning. When did superannuation start in Australia, how has it changed over time, and what does it mean for you as someone who pays super?

When did super start in Australia?

Super as we know it today, the Superannuation Guarantee (SG) has been around since 1991. But it might surprise you to learn that superannuation in some shape or form has existed in Australia since the 1900s.2

Superannuation in the early 1900s

In the year 1900, New South Wales introduced an Aged pension that was means tested and funded out of general revenue. Queensland and Victoria followed, introducing the same system closely afterwards. At the time, the payment was the equivalent of about $45 per year.

Nearly 10 years later the Invalid and Old Aged Pensions Act 1908 was passed, which would officially introduce super payments to the whole country.

Before the Aged Pension, anyone not working would need to self-fund their retirement, assuming they weren’t one of the lucky few who had a pension provided by their employer.

In 1915, a new Act introduced the Income Tax Assessment Act 1915, while also making superannuation savings tax-free, and employer contributions tax-deductible.

Superannuation post 1950

Between 1950 and 1985 changes were made to the Aged Pension, but there was no introduction of private or guaranteed superannuation yet. According to the Australian government’s timeline, an ABS study in 1974 revealed only 32 per cent of the workforce were covered by super at this point, majority of which were male.

By 1988, 51.3 per cent of employees were covered by super, and women’s access grew from around 15 to 30 per cent.

The start of the modern superannuation system

When the 1991 Budget was released, it introduced the Superannuation Guarantee (SG), a compulsory system of superannuation support for Australian employees. A scheme to be paid for by employers, the first year of this new Act boosted super coverage for Australians to 80 per cent.

Over the next decade, coverage rose to 91 per cent, and the superannuation guarantee rate increased to 9 per cent.

In 2005, two new systems were put in place that we still have today: the ability to choose your own retirement fund, and the Transition to Retirement Pension, where a person can contribute a larger portion of their salary to super and replace their salary income with a drawdown from the pension scheme without having to leave the workforce or retire.

Superannuation in Australia today

Fast forward to today, and Australia has one of the world’s best superannuation systems, with more than $3 trillion invested as superannuation assets, and the fourth largest holder of pension fund assets in the world.3

Now, a good super fund will let you make voluntary contributions, offer insurance and other cover options, some even let you decide where you invest your money.

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Important information

1. Based off a recent survey by ERGO Strategy Research and Insights for Virgin Money Australia

2.Source: https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/bn/0910/chronsuperannuation

3. Source: https://www.superannuation.asn.au/resources/superannuation-statistics