- by Marcus Browning
- The Guardian
- Issue #2158
Photo: aag.com – flickr.com (CC BY-SA 2.0)
Recently a Superannuation Lending Roundtable was organised by The Australian Financial Review and the Visy cardboard packaging company owned by Anthony Pratt. The headline in the Australian Financial Review read “Super lending for corporate debt is a productivity plan.” Here the objective of the Productivity Roundtable later this month between government, employer and union representatives is made clear: increased exploitation of workers’ labour, and $4.2 trillion in super funds.
Pratt, a high-profile corporate cheerleader of Donald Trump, is known by Visy workers as Pratt the Rat.
The AFR editorial, is titled “Tapping the super funds’ deep pools of capital to unlock business investment and unleash productivity growth is an idea whose time may have come.” It has come – and gone.
In the 2008-09 financial market crash super funds were hit with record losses. Around $200 billion of workers’ retirement savings were wiped, and many workers were forced to put off retirement, while retirees returned to work. Workers lost 20- 50 per cent or more depending on how their savings were invested. While workers’ savings were haemorrhaging, the financial institutions were using the super funds to help bail themselves and the corporate sector out of the crisis.
The introduction of the compulsory superannuation guarantee by the Keating government in 1992, had a number of aims. These included winding back the publicly funded aged pension; shifting responsibility onto the individual for self-provision during retirement; privatising the provision of retirement income; and providing the private sector with a large and growing source of investment capital.
From the finance sector’s perspective, the growth of superannuation funds has been very successful in providing investment capital with a guaranteed continuous income stream recently rising to twelve per cent of wages paid.
The banks, insurance companies, and their various subsidiaries have the use of the super funds that they control to buy shares in themselves and thus prop up and manipulate their own share prices. A conflict of interest if ever there was one! This demonstrates clearly that there is no guarantee that any fund can or does always make investments with the best interests of the workers’ and their savings in mind.
On the other hand, superannuation funds have saved the bacon of many corporations and possibly some of the banks and insurance companies.
In the past, a number of the largest corporations listed on the Australian stock market have raised record billions through share issues and other means. They have used this money to wind back debt and purchase bargain-basement priced takeovers that can be found during an economic crisis. A lot of this money came from superannuation funds.
Without this injection of super savings and faced with banks refusing to roll over debt, many private companies would have been in dire straights. Their collapse would have resulted in further losses to super funds. This highlights the contradictions facing workers, the fate of their savings so integrally tied to that of the big corporations which exploit them in the workplace and then profit from their superannuation savings.
TRANSFER RISK
When a person deposits money into a savings account or fixed term deposit the bank guarantees payment of a certain rate of interest and repayment of the sum in full. The bank takes the risk, lending, investing and speculating with that money. The bank carries any losses.
Superannuation transfers all of the risk onto the backs of workers. They are not guaranteed one cent of income and they are not guaranteed that the money they deposit will be there when they come to withdraw it. The financial institutions invest and speculate with the money in their own interests. For the privilege of risking superannuation savings, they then charge crippling fees.
The financial system is making a killing, churning huge profits from control of workers’ savings, with workers carrying all the risk.
Industry funds, which are not-for-profit and have trade union as well as employer representation on their boards, consistently outperform the other funds. Industry funds generally do not charge the hefty fees and commissions that private funds impose. While they do to some extent determine the types of investment, they do not have control over day-to-day investments which is done through custodians.
Super savings are subjected to highly speculative practices on stock and futures markets, and in currency trading.
Private funds managers help themselves to outrageous entry fees on deposits, exit fees on withdrawals, a range of commissions, fees for financial planners and other “services.” Some charge entry fees of four or six per cent on money paid into a fund, then help themselves to another one or two per cent for financial planning, a bit more for management and so on.
The government has become concerned about hefty fees eating into savings, fearing that super funds will fall short of their objective of replacing the aged pension. Other concerns have been raised about the rising cost of the special tax concessions relating to superannuation savings. These concessions were designed to encourage people to put more money into their funds by such means as salary sacrifice. The rich are rorting them to the hilt, using them to extract tax-free income from their investments in their own personal super funds.
Tax experts estimate that it would be cheaper for the government to make the aged pension universally available than funding the superannuation tax rorts for the rich.
The privatisation of the provision of retirement income is a big boon for the corporate and finance sectors, but it does not and cannot provide security in retirement for all workers. The only way to do that is through the centralised public provision of a pension by government. The aged pension should be universally available and sustained at a level such that retirees can live with dignity with a high standard of living.
Superannuation should be over and above a universal aged pension. Workers should have the option of making contributions to a national superannuation fund, run by and guaranteed by the state. This would be a defined benefit scheme, providing retirees with a guaranteed fortnightly income for the rest of their life. Similar schemes were the norm before the process of privatisation of retirement incomes began.
A national superannuation fund would be of additional benefit to the community, with its funds invested in socially desirable projects such as the building and provision of public housing, public infrastructure, health, education, aged care and other services. Industry and private superannuation funds should be subject to greater regulatory direction governing their investments, including a requirement to invest a certain percentage in government guaranteed public sector projects.
