One way to limit the budgetary cost of superannuation is to make its sole purpose to allow people to live comfortably in retirement. That’s not what’s going on now.
Most of us are too young to see it, but a big way the federal government affects our lives is through its system of compulsory superannuation. As you get older and retirement becomes a lot less distant, you begin to realise that the rules of super – and successive governments’ tinkering with those rules – will have a significant impact on the up to 30 years of your life after you stop working.
Since the introduction of that new system, almost every government has changed it. Why? Because the new compulsory system was bolted onto an old voluntary system of tax concessions that proved to be far too generous to high-income earners and too mean to lower-income earners.Everyone knows the age pension costs the government a lot of money.
But first, one insight of “behavioural” economics, borrowed from psychology, is that people can react very differently to the same circumstances, depending on how they’re packaged or, as the psychologists say, “framed”. It’s been shown that surgeons much prefer a 90 per cent success rate to a 10 per cent failure rate.This, of course, is spin doctoring 101. Reminds me of the story about the bloke who invented death insurance. Didn’t sell many policies until he changed the name to life insurance.
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