For the vast majority of us – superannuation and other retirement products have failed us dismally. It is time to scrap these systems and products… and start over.
A short time ago I introduced a new page to Goldsmith Money, titled ‘Lost Retirement’. In light of Coronavirus, I thought it timely to expand upon this topic.
We previously discussed the depleted balances of superannuation and pension accounts attributable to stock market crashes. It is certain now that the market crashes of 2008 and 2020, accompanied by negative interest rates and excessive money printing, will see these products fall well short of the promises they made.
The compulsory superannuation and pension systems of the world have completely failed the working class of the past 20-30 years. Meanwhile the ultra-wealthy were able to use these systems to minimise their income tax obligations for 3 decades and potentially enrich themselves selling these failing products.
And the products will not only fail to deliver the retirement income stream that the vast majority of workers will need – they have left workers highly vulnerable to economic downturns and the Black Swan events such as Coronavirus.
Nations of the world have been forcing their citizens to contribute a percentage of their wages and salary to retirement products. In doing so they have significantly reduced their ability to:
- Save money for times of financial hardship.
- Repay their debts more quickly.
- Build a alternative passive income streams to replace lost wages and salary.
At present, millions of workers have been left unemployed due to a worldwide economic coronavirus shutdown. Readily acessible personal savings and alternative income streams would have saved a great deal of hardship, for a great many. It would have also saved governments a great deal in support payments.
Regardless of major catastrophes however, workers should have personal savings set aside for all manner of contingency. Sickness; redundancy; repairs and maintenance. Workers should also have funds available to take advantage of investment opportunities which might arise.
The points I have made here might be considered personal liberty arguments for the scrapping of compulsory superannuation. Giving an individual the freedom to invest and save for their own retirement, as they choose. In addition to personal liberties however, there is also data to show that current systems are not simply failing the workers, but the economy as a whole.
Cameron Murray of the University of Sydney, in his article titled ‘Superannuation isn’t a retirement income system – we should scrap it‘ argues that these compulsory superannuation systems are inefficient, costly and ultimately depresses the economy. He eloquently states:
It is better thought of as a growth-sapping, resource-wasting, tax-advantaged asset purchase scheme aimed at the already wealthy, which is unlikely to do much to reduce reliance on the age pension.
There are many reasons to scrap this system which has failed so many and I have touched on just a few here. It is up all of us now to capture all the reasons and then petition our governments to do so.