Sean Fannin, GBST’s Technical Legislation Consultant reviews the latest legislation that could affect wealth management administration platforms.
Did you know that the word ‘superannuation’ has been in the English language since about the 17th Century? It’s derived from medieval Latin, superannuatus, derived from super- over + annus year. The literal definition of the word “superannuation” is a regular payment made into a fund towards a future pension.
While many may think that the concept of superannuation is fairly new, it is interestingly and generally considered that the Roman Emperor Augustus instituted the first pension scheme in 13 B.C. for retired veteran soldiers. These pensions were, for the most part, financed by various taxes.
So now let’s take a look at the super-long history of superannuation we know today in Australia
The first pension plans were established in 1857 by the Australian Mutual Provident Society, now AMP, where an individual would buy an annuity (i.e., income stream) with a lump sum.
However, the concept of providing a retirement fund was started by the then Bank of New South Wales, now Westpac Banking Corporation, where all new young male employees had to provide money, held in a provident fund, as proof of their good character and to protect the bank against any losses, accidental or otherwise, during their employment. In 1862, this fund was altered so pensions could be paid when the men reached retirement age of 60 years. From 1872, male employees could pay additional annual contributions. In 1938, the Bank of New South Wales established the first private sector retirement fund for their female employees.
During the 1890s depression, various Australian colonial governments considered commencing old age pensions. New South Wales and Victoria introduced legislation in 1900 and Queensland introduced legislation in 1908. These were generally means tested payments.
In 1908, the Commonwealth of Australia introduced the Invalid and Old-Age Pension Act 1908 under powers of the Australian Constitution. This Act set the age a person could receive an Old-Age Pension at 65 for men, and age 60 for women.
By the 1950’s the concept of superannuation had spread but was mainly provided to permanent staff primarily as a reward for long service. Additionally, private sector employers started establishing their own company administered funds (i.e., corporate funds) or paid regular amounts into a life insurance office administered fund.
During the 1960’s, superannuation increased in popularity when the tax treatment of contributions became more generous for the self-employed. However, concerns grew about the cost of many of these funds, how they operated, and the favourable tax treatment for the fund sponsor rather than the membership.
Despite these tax incentives, large sectors of the Australian workforce did not receive, nor were members of a retirement fund. A number of government inquiries led to significant changes. This included having compulsory superannuation contributions in industrial awards in 1986.
While various superannuation arrangements had been in place for many years, the current compulsory system, known as Superannuation Guarantee, was introduced by the Keating Government in 1992. Under this system, employers are required to make compulsory contributions on behalf of their employees. From 1 July 2023, this rate is 11% of most employees’ Ordinary Time Earnings.
The Australian superannuation system is a highly regulated, and complex system. It is is under constant review and change. However, despite its complexity, the Australian superannuation system is considered successful, assisting Australians to save and invest for their retirement.
GBST’s award-winning SaaS wealth management platform Composer helps superannuation funds improve efficiency and ensure regulatory compliance. Built on a modern technology stack, Composer is designed to make it easy for super funds to provide tailored, streamlined, and comprehensive superannuation solutions to customers – giving them the technology functionality they need to optimise their business.
Read more about GBST’s wealth management administration platform, Composer.
Disclaimer
The material included in this blog is designed and intended to provide general information in summary form on a topic which is current at the time of publication. The material may not apply to all jurisdictions. The contents are not intended to constitute legal, business, or other professional advice and is not intended to be comprehensive or a substitute for advice from a qualified professional such as a solicitor. GBST Holdings Limited ACN 010 488 874 (“GBST”) makes no statements, representations or warranties about the accuracy or completeness of the information and you should not rely on it. If GBST’s blogs contain links to other websites for further information, GBST makes no representation or warranty as to the accuracy or validity of information or material on those websites and excludes all liability for those websites. GBST will not be liable to any person for any loss or damage (whether direct, indirect, consequential, or economic), however caused and whether by negligence or otherwise, which may result, directly or indirectly, from reliance on information contained in GBST’s blog.
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Posted in: Legislation, Superannuation, Wealth Management Administration
