Why Australians need to question their Superannuation System: The 10 Reasons it’s Not Fit for Purpose

Friday 11 September 2026

By Deep T, editing Gunnamatta

A critical examination of a $4.4 trillion compulsory savings experiment

Australia has a superannuation system which is often held up as a global model. In one key way it certainly is — it is a compulsory savings scheme that has amassed $4.4 trillion in assets at market value as of March 2026, making it the fourth-largest pension pool in the world. With a global population of 8.3 billion, a body of funds from a country of only 28 million people of that size, equal to roughly 150% of Australia’s GDP, has implications for all Australians, as well as being the envy of fund managers globally.

It is often held up as source of solidity and surety which has already ushered a generation of Australians into a more affluent retirement than their parents and grandparents would have dreamt of and sells itself on that basis. But the size of the super pool relative to GDP ensures that Australia is closer to a centrally managed economy in some key respects.

In particular, the size of the funds under management has implications for Australian politicians and policymakers, as well as the nominated beneficiaries. It has enormous implications for a corporate Australia, which outside commodities, is inwardly focussed, servicing some of the worlds most expensive labour, with additionally expensive housing, energy, retail, telecommunications and internet, and medical services, as well as financial services and insurance, in an economy which has a larger private debt than any comparable economy.

The operation of the system links past Australia to current Australians, and current Australia to future Australians. Those entering the period of life where the superannuation is accessed are effectively supported by Australians entering the workforce, for whom past superannuation experiences are a model and future expectation.

And the questions about the superannuation system only get bigger from there.

The above chart, first released in 2022, raises some major public policy questions for all Australians.

Introduction

Australia’s national superannuation scheme has worked well for currently retiring Australians. But as nearly all financial services are quick to note ‘past performance is not a reliable indicator of future results’. As for every economic initiative the details matter. The people, the economy and the rules of Australia’s compulsory superannuation scheme all change, and have changed markedly since the advent of Superannuation. All changes have impacts on how the system will work in future.

This series of blogs will note weaknesses, as well as the strengths, of Australia’s compulsory superannuation system. It will make suggestions that may better suit Australia’s needs and would lead to better outcomes for more Australians, and particularly for younger Australians and future Australians, with greater system integrity and transparency

Australia’s superannuation system was devised nearly 40 years ago as an agreement between the then Labor government and Australia’s unions, with considerable business support. But it was also opposed by the then Liberal opposition, as well as various interests concerned about union power and any role it may have in determining investment flows, and the requirements by employers to set aside and match contributions by individuals.

Subsequent governments, both Labor and Liberal, have made significant structural changes, as well as increased contributions. These include the scope for individually managed funds, various attempts to push private sector interests into funds management, as opposed to Union influenced mega funds which remain central to the system, and the taxation treatment of both the contribution and access stages.

Over time, what was intended originally to become a pension replacement or supplementation system, has evolved to become a wealth or asset management, or even bequest management tool, subsidised by Australian policymakers and taxpayers.

The asset allocations of the Superannuation industry bring their own questions about the value of the balance between the concessional taxation, the ‘national interest’ of economic development, and the individual interests of the person with their name on the fund.

To see how this has unfolded needs reference to the original idea of a national compulsory superannuation scheme, the protracted processes which shaped what became part of legislation, and the evolution of the system.

The intent behind superannuation in its originally proposed form was threefold.

To increase prosperity and dignity for post employment Australians by pushing them to set aside during their working careers, have employers contribute to this also, and to have this fund properly managed.
To remove their dependence on the old aged pension, and reduce the possibility that this would become a more significant outlay requirement, as Australia’s workforce aged, affecting the Federal budget position of future Australian governments.
To promote the development of a body of capital, and a deeper domestic capital market, which would become an investment source for industrial and economic development of Australia, for the benefit of future Australians.

In order to get political and economic backing for the mandatory contributions from both the union movement and the corporate elite, key facets about the idea were left vague and never clearly articulated or embedded in policy. This lack of clarity about key aspects of the original idea has been both a significant factor in how Superannuation has developed and the genesis of questions about how Superannuation will work for future Australians.

If superannuation meant;-

The creation of a massive fund of money, to
Take Australians off the Aged pension ensuring a balanced budget stabiliser for future Australians, and
That would support investment in Australia’s ’national interest’ and in the economic development of Australia with a deeper capital pool.

Then parts 2 and 3 were never nailed down. Only the creation of a massive fund of money was made mandatory, with corporate Australia, Australia’s workforce, and future Australian governments all committed to actions by an Act of Parliament.

The dynamic of taking Australians off the Aged pension, while ensuring life dignity after retirement and thereby taking a major budget strain off future taxpayers and governments, was never clearly articulated the same way. It is now a distant thought bubble, and the taxation concessions on Superannuation contributions are now nearly as large a budget line as the Aged Pension.

Any articulation of what ‘in the national interest’ actually meant never made it off the table at birth. Beyond the individual with their name on the fund, and those doing the contributing, managing, taxing, and investing of those funds having a dollar positive transactional outcome over a timeframe acceptable to them, there was never anything other than the goodwill of those making money, to make clear to Australians that superannuation was and would remain for them and in their interests.

However, behind the headline figures lies a system with significant structural flaws. It subsidises the wealthy, often fails those who need it most, concentrates an extraordinary share of national wealth in the hands of a few fund managers, and may be actively harming the dynamism of the Australian economy. In the era of AI that concentration may enable technology to identify, shape and profit from that concentration.

In relation to the original aims of superannuation it could be observed.

It has certainly increased post retirement prosperity for many Australians to the present time, but its scope to continue doing so into the future is increasingly questionable.
It has rarely removed their retirements as an impost on the federal budget and has evolved to rely heavily on age pension access, and in many instances is deliberately managed so as to retain that access.
It has resulted in a globally significant body of funds, but this is largely invested in physical assets, pro cyclical, low risk, low economic return positions, or is regularly invested offshore, as the Australian economy has largely deindustrialised, become significantly more focused on commodity exports, and less on the attributes acumen and initiative of Australian managements and employees competing internationally.

The dichotomy between the aims and outcomes of superannuation are such that, although nearly all adult Australians have significant funds in the system, pervasive questions about the system have mounted over time. These include:-

Does superannuation make sense for lower income Australians?
Does superannuation make sense for younger Australians?
Does taxation treatment of superannuation make for a fair and balanced public policy position and budget allocation leading to effective outcomes for all Australians?
Are the funds represented by superannuation making a meaningful contribution to Australian economic development?
Does a need to contribute to superannuation by employees represent a reasonable balance in relation to other life costs – notably housing – and can it be expected to represent an ongoing reasonable balance in the future?

Over the coming weeks we will look at 10 key facets of contemporary superannuation which all Australians should be thinking about.

The Taxpayer Is Subsidising Wealthy Superannuants
Super Doesn’t Create Money — It Reallocates Control Over It
It Favours the Wealthy and Penalises Everyone Else
It Fails Non-Working Wives, Carers, Entrepreneurs, and Divorcees
Fund Management Is Dominated by a Handful of Mega-Funds
Fund Managers Operate Under a Narrow Mandate That May Diverge From the National Interest
The Government Corrals the Wealth but Lacks a National-Interest Investment Architecture
Compulsory Super Slows the circulation of Money
Fund Managers Chase Asset Appreciation, Not Productivity
The System Stifles Opportunity for Young Australians