The Shame of Financial Hardship

 Written by: James S. on 29 March 2022

I used to work as a consultant for one of Australia’s largest Industry Superannuation Funds. Before this I had no prior experience in the financial sector, every day had been a new challenge, there was a lot to learn with regards to the rules and legislation of super and it’s probably in most people’s best interest to know at least some very basic things about how it works, especially when it comes to accessing it. 

As part of my job as a consultant for a superfund I’d heard a lot of heartbreaking stories from those in severe financial hardship. A lot of people feel that they need to tell a consultant why they’ve called and preface their questions that they don’t want to dip into their retirement savings but have no other choices. Illness, injury, disability, surgery, mortgage payments, rent, bills, needing legal aid, food. Just some of the many reasons that people seek assistance from their superfund. Centrelink payments alone can be so infrequent and minute and the service provided so shackled by purposeful underfunding and legislation that people need to seek out their superfund’s phone number and call for help. People felt that they need to apologise, that they were sorry for wasting my time with their situation and that they shouldn’t be doing this. Shame fuels a desire to justify their reason for calling and it really shouldn’t. It was my job to help, it was also my job to make sure we did this correctly, together.

As you can imagine, withdrawing super before retirement is not a simple task and will take time, something people in financial hardship tend to have very little of. As a consultant I needed to make sure that those wanting to withdraw met the legal eligibility criteria and completely understood the implications on accessing super for financial hardship. Each step of this process puts more mental load on the person calling about their situation, it’s not an easy task and maybe not the right decision for some. 

To access super for financial hardship the criteria is the following. First you need to be on Centrelink payments for 26 continuous weeks. Miss a single payment or get a part time job for a couple of weeks and that resets the clock. Not all payments from Centrelink are eligible either, which only adds to the confusion when different payment types have similar sounding names. Anyone currently in receipt of Centrelink payments has a Centrelink Reference Number or CRN. This is what is used by superfunds to determine that someone requesting access is on the right payments for the right amount of time. Superfund members will send in their CRN along with all their personal details, bank account details and certified ID to us for processing.

With your application you can request up to $10,000 for financial hardship from your super. That’s up to $10,000 no longer being invested for you and could have been years of progress made by previous work now suddenly undone. People need to go through all these steps, provide as much information as clearly as possible, hope they’ve met the correct criteria and then they can be approved for the release of their requested funds. An inelegant process that to the individual appears to be as difficult as possible for those who need the most help. The frustrations of this process don’t end here as well.

If you’re under 60 that’s going to be taxed at the withdrawal of around 20% plus the Medicare levy so if you request $10,000, that amount is not going to hit your bank account. A caveat that catches people off guard quite a bit, a real kick while you’re down moment for the desperate. Super belongs to you for your retirement, so it feels like you’re being punished for accessing it when you need it before retirement and when you need it the most. This only feeds people’s shame about this process. So, with tax being withheld on the withdrawal the other major condition of this release is that you can also only request a payment for financial hardship once a year. Not a calendar or financial year, as in you need to wait 365 days from your last withdrawal if you need to do it again. So do you request the full $10,000 to last you as long as possible or go for a lower amount? Another question, another burden. 

When speaking with those wanting to go through this process, I tried to inform as much as possible, it was my job to be a messenger who relays a process that is embarrassing and tedious.

In television and internet commercials, super is sold to us as part of the dream of retirement, the proposal that while young you can invest in your future, scrimp and save away, have your money invested on your behalf in the market. If you work and sacrifice hard enough, you’ll get a big return and live out your golden years day-drinking and travelling. Super is a reflection of the decades of hard work you put yourself through and reward for participating in capitalism, selling your labour power and paying off your landlord’s mortgage. So, keeping on top of it is important because if you’re with a lower performing fund you’re going to have less to retire with.

Assistance should be there, implemented by the state, by and for the people because it’s for the best. Legislation around financial hardship should be for the benefit of uplifting those currently suffering. Superannuation is great if you benefit from capitalism and can make regular contributions to it, or if you sacrifice present wants and needs for a potentially more comfortable future for yourself. The capitalist and individualist society we are part of is the perfect kindling for the burning shame of people who can’t do this and feel they will never see the benefit of it. It’s easy to see how individualism can lead to selfishness when able to benefit from it but when you don’t that turns to shame instead. People are empowered to be selfish because they’re rewarded for it in neoliberalism. When that’s not rewarded, the empowerment of selfishness is replaced by shame and this was something that wasn’t apparent to me until I worked in super, now it seems obvious.

Individual blame on the individual for not being successful financially tends to be processed in two ways, shame and anger. Anger is another strong and justified emotion. Desperate people call their superfunds, wanting to know why the process is the way it is and I don’t have an answer for them that doesn’t come across as defending it or sounding especially cruel. I empathised and stayed on their side no matter any supposed justification, this fellow human being needs help to navigate a process designed to apply a band-aid to a bullet wound. How could I ever possibly defend legislation around this? 

It doesn’t have to be this way, this structure in our lives can be changed, moulded and controlled. Shame isn’t something you need to feel when you ask for help. Working in super and talking to people in need has galvanised me more in my political education than I could possibly have predicted. 

Hearing stories from people who are hurting who don’t deserve to be forgotten and discarded. Truly the only shame that should be around financial hardship should be on all those responsible for putting others through these hard times.

 

Superannuation: The big swindle kills the illusion of the golden nest-egg

Max O.

Recently the media reported on a superannuation study entitled, "Not So Super" by Per Capita, a social justice think-tank, whose survey showed that Super earns better for those on high incomes (mainly men) but not those on low to no incomes (mainly women). Under capitalism superannuation is the Hermes of Greek mythology - a sneaky trickster, stealing things from other gods and hiding them in mindboggling locations.

The Hawke Labor government in the early 1980s ushered in superannuation to provide a savings retirement scheme so workers could supposedly retire in dignity. It was intended to take the edge of wage demands as part of a "social wage" concession. It became Labor's signature policy that ALP politicians would triumphantly boast as their great innovation.

However, there is nothing to boast about superannuation for the working class, it has turned out to be a liability for them and only an innovation for finance capital. Financial sources in 2016 calculated that the average Super saved by men was between $290,000 and $300,000, and for women between $138,000 and $180,000, which is not enough to provide for a comfortable retirement.

A retired person would need from $400,000 to $550,000 in their Super and a couple from $600,000 to $1.2 million to live reasonably. By far the majority of workers have Super accounts far lower than these amounts as indicated by the Retire Ready Index; it detailed that 47% of the workforce, 5.1 million of Australian workers will not have enough funds in their Super for a secure retirement.

Women big superannuation losers

Superannuation for most women is even more precarious because of the sexist nature of Australia's capitalist society. The Per Capita survey found that women retire on 47 per cent lower sums than men. Just achieving the inadequate figure of $150 000 in Super, saw poor results: three out of 10 for women and six out of 10 for men reach this sum.

One in every two Australian women works part-time, compared to only one in every five men. And still more are employed away from the formal workforce where they don't receive superannuation. On average those who are employed full-time get 20 per cent less than men.

All up, it means women get 33 per cent less than men while in the workforce, and a lot less overall because they are often out of the workforce having children, caring for children or caring for relatives. The world of work has worsened so much that superannuation was a flawed project from the beginning, or as Per Capita puts it: "Superannuation was designed around a model of employment that is rapidly disappearing."

Wage theft

Around 2.8 million people were owed $5.6 billion, an underpayment of $2,025 a person each year, in unpaid Superannuation Guarantee Charge in 2013-14 reported the Australian Tax Office. The major offenders come from the construction, hospitality, manufacturing and mining industries.

The increase of casual, part-time and cash-in-hand employment has seen a surge of non-compliance of compulsory Super obligations by employers. Tony Sheldon, national secretary of the Transport Workers Union called such practice wage theft: “It’s not break and enter, … it is the plague of billions of dollars in wages and superannuation which employers take from the pay packets of their employees,” he said. “It is wage theft. And needs to be treated like any other form of theft by making it an offence, with jail sentences.”

The current severe anti-union industrial scene has led to the weakening of implementing enterprise agreements and compulsory superannuation. Governments and business have aggressively restricted unions' capacity to monitor and enforce correct wages, conditions and entitlements such as Super.

The Federal government has implemented a detrimental number of changes to Super: frozen the expected increase of the superannuation guarantee from 9% to 12%; altered the pension asset test that penalised 300,000 superannuated retirees who are now in a financially poorer position; the last budget imposed a cap of $1.6 million on the amount of super that can be transferred into retirement phase, making it that much harder for retirees to achieve a comfortable retirement.

The Coalition government obviously has a clear policy agenda of emasculating the Super retirement savings of the five million Australian workers. Another measure they have concocted to carry out this agenda is their intention to appoint an 'independent chair' and a third of board seats with 'independent directors' to industry not-for-profit Super funds to make them "accountable and transparent" - amd open to pressure from Government appointees.

Retail super funds offer lousy deals

Industry super funds have accused the big bank operated retail super funds of underperforming by 1.9% per year for the last decade compared to theirs. They point out that the 10-year Australia Prudential Regulation Authority (Apra) performance data demonstrated that bank-owned retail super funds have not delivered above-median returns for 95% of their members over the previous 10 years.

Industry Super Australia stated: "Constant outperformance by industry super funds over bank-owned super funds reflects the differences between for-profit and not-for-profit business models, which over the last two decades have seen significantly different member outcomes.

“The fact is, running a super fund to profit a parent bank sits very uneasily with the interest of members and the social policy objectives of compulsory superannuation."

Not-for-profit super sector generated 96% ($42.9bn) of cumulative fund-level investment returns above the median over the last 10 years, whereas the for-profit retail sector accounted for 96% ($25.4bn) of value lost relative to the median. After this suspicious performance, the Coalition government is not contemplating an investigation of the bank-owned retail super funds nor their governance.

Tax evasion by the rich

Superannuation for the rich has become a means for tax evasion. People on high incomes have covetously moved much of the earnings into super. For example, the amount earned over a $180,000 is taxed at 49 cents in the dollar. This can be reduced by putting that portion into a super account where is will be taxed at 15%.

One of the biggest losses to the Federal Budget is the tax concessions for superannuation. It is losing around $30 billion a year through tax evasion schemes practiced by the wealthy.
Superannuation tax concessions are growing at 13% a year; however, the government is more concerned that the pension scheme is growing at 3% a year. The tax loss of super tax concessions to the government budget will be greater than the cost of the pension.

The poor receive no tax discounts and in fact are penalised whilst the rich are granted charitable concessions, and the government insanely forfeits huge sums of revenue.
apitalism formerly relied on accumulated profits, wealthy shareholders and bank credit loans for its continual expansion. Now superannuation funds play a significant role in providing investment capital.

Per Capita reported that Australian Super is worth $2.3 trillion, which is more than Australia's annual GDP. It naively thought that the present superannuation system should be scrapped and a scheme that paid out according to need should replace it.

Subsequently Per Capita came to the conclusion it was too far gone because the finance industry lobbyists would line up against this. Their grasping, Hermes-like fingers have too strong a hold of the Super industry. Superannuation has become just one more scam in a litany of scandals that plague capitalism's pursuit of expanding accumulation.

The Labor Party in creating the superannuation system in fact the betrayed the working class and sacrificially handed up its earnings to capital for expropriation.

A decent social system - socialism - would provide a secure and comfortable retirement for all, something capitalism refuses to do.

Housing Bubble About To Burst?

Ned K. 

The issue of housing and household debt is prominent in the media at the moment. Warning signs of a crash in the housing industry are accompanied by some pretty staggering statistics and predictions. 

For example, in the Weekend Australian (6-7 April 2017) Adam Creighton wrote a piece titled "If The Housing Bubble Bursts, Our Entire Economy Will Crash"! 

He said that excluding resource exports, greater than 20% of Australia's economic growth in the last four years related to home building and there are 600,000 jobs in home building all up. Each new home built gives rise to consumption growth, provided the home is sold of course. Sold they are, but often to speculators or developers with investment in property at a three year high.
Foreign buyers make up over 20% of the housing sales in Victoria and NSW.

The housing market is highly concentrated with Sydney and Melbourne making up more than 50% of the market. Despite the continued demand for housing from working people who have to borrow heavily to purchase one, investment analysts such as Jonathon Tepper from UK says the bubble is about to burst with home approvals having peaked in early 2015 and still falling.

He asks, "Could Australian home values be a mirage?" with house prices in Sydney and Melbourne having risen 100% since 2008.

How have people been able to buy houses over this period when it is also no secret that wages and salaries as a percentage of GDP have declined?

Where does the money come from? From what the capitalist press is saying, it is largely due to people borrowing amounts of money for inflated house prices that they cannot afford, courtesy of the banks and other financial sharks.

Australian household debt is rising three times as fast as wages and has been doing so for nearly a decade and is now over 190% of GDP.

Most of Australians' wealth is tied up in housing directly and also through shares in the very banks to whom people are in debt!

One staggering figure from the Australian article is that 40% of the $1.65 trillion in mortgages outstanding is in interest alone!

In the 1980s, business loans made up more than 67% of loans from banks.

In 2016, business loans are less than 33% of the $2.67 trillion of outstanding loans.

Now the prices of housing in the dominant markets of Sydney and Melbourne are beyond most young working class homebuyers and those that do buy are taking ever higher risks of not being able to pay off their house payments. 

Job losses and reduction in family income through reduced working hours or irregularity of work add to the brewing problem. The loss of full time jobs over the last four years and growth in more precarious jobs with respect to hours of work is still the dominant trend, despite the last two months seeing the highest number of new full time jobs in over 25 years.

This latter statistical information from the ABS is a misleading because it includes full time casual work which is not guaranteed work even in a capitalist economics sense. The figures also include labour hire jobs created by companies and governments outsourcing work. These jobs register as new jobs as their employer (the labour hire company) records an increase in its workforce!

How Super Is Super?

This question was asked when the employer-paid superannuation scheme was brought in to awards in the late 1980s in lieu of a wage increase. 

Ever since its inception there has been a struggle between the industry run funds on behalf of workers and the big end of town who want to get their hands on the accumulated funds worth trillions of dollars now. 

The latest idea of young people being able to divert employer-paid superannuation payments in to an account to be used as a deposit on a new home is really a transfer of workers’ money to the financial institution issuing the loan for the purchase of the home. It is yet another transfer of wealth from the workers to finance capital, a desperate move to try and keep the capitalist system growing which is its modus operandi.

You would think that the housing industry and banks would support Sally McManus and the ACTU push to lift the minimum award wage towards 60% of the median wage. The minimum award wage is currently a historic low of 44% of the minimum wage. Some may support it, seeing that an increase in wages will entice more to keep an interest in buying a home. However other sections of the capitalist class including the Business Council of Australia are outraged at a $45 increase to the minimum weekly wage and think the increase should be less than 2%.

Whatever they do, it is unlikely the competing sections of the capitalist ruling class can prevent a crash in the housing market and the catastrophe for families immediately affected by it. 

Perhaps they know it, the same as Trump knows he cannot provide the thousands of blue collar jobs he promised to 'make America great again'. Perhaps that what is what the talk and growing practice of war is all about. 

Their last resort to breathe life in to a moribund system is to force the people on to a war footing.

No security for workers under capitalism

Bill F.

As the global financial institutions and corporate monopolies wield their ‘market forces’, Australian workers face increasing job insecurity during their working lives and fading dreams of a ‘comfortable retirement’.     

Courtesy of the austerity budget, the age pension, already miserable, will be indexed to the consumer price index rather than average male weekly earnings, from September 2017. Other benefits such as disability support, carers’ payments and veterans’ pensions will also take a hit.

Assault on workers’ superannuation

Compulsory superannuation, paid for by employer contributions, is sometimes supplemented by a means-tested part pension, which together is supposed to provide workers with a reasonable standard of living in their retirement years. In addition, better paid workers can make voluntary contributions to add to the employers contributions.

The current employers’ contribution is set at 9.5% of wages, and was due to increase to 10% next year, rising to 12% by 2019.

 

Now, as a result of the Abbott government deal with Clive Palmer to repeal the Mining Tax, workers’ superannuation earnings will be slashed. The 9.5% employers’ contribution will be frozen until 2021, when it moves to 10% and will not reach 12% until 2025.

This means that younger workers especially, will lose many thousands of dollars from their retirement ‘nest egg’ by the time they reach an age when they can access their superannuation.

Analysis carried out by Industry Super Australia for The Australian shows the massive impact this will have on retirement income. At retirement age, for example…

• 30 year old worker on $50,000 p.a. will lose $19,632
• 30 year old worker on $80,000 p.a. will lose $31,411
• 40 year old worker on $50,000 p.a. will lose $13,706
• 40 year old worker on $80,000 p.a. will lose $21,930

But that’s not all.

Another part of the austerity budget sought to scrap the $500 low income superannuation tax rebate for workers earning less than $37,000 in a tax year. With many workers in part-time and casual work or low-paying jobs, from 2017 when it commences, this measure will take a large chunk out of their expected retirement savings.

For a worker earning $35,000 p.a. from 22 years old until retirement at 69 years, it will amount to a loss of 16.7% of their final lump sum.

Where does the money go?

In the case of the increase in employers’ contributions being frozen and delayed, the money stays in the bosses’ pockets!

The bosses and the bourgeois economists say that this will allow them to hire more workers and pay for future wage increases. Yeah, and pigs can fly?!

As for the low income superannuation tax rebate, that stays in the government coffers to shell out among favoured big business mates and expensive consultants and military adventures.

Socialism – secure work, secure retirement

In contrast to the system of class rule by a small core of exploiters and profiteers, socialism uses the wealth and energy of the nation to build a society that meets the needs and interests of the people, especially the working class.

In contrast to capitalism, socialism guarantees secure and meaningful work, it guarantees decent healthcare and education, decent housing, efficient public transport and a good standard of living in retirement.

It guarantees participatory democracy in the decisions affecting people at work and in the community, in the formulation of public policies and in their implementation, and not just the election of (dud) representatives every so often.

It guarantees respect for the environment and promotes clean and sustainable energy in place of the old polluting industries and profit-driven exploitation of the land, rivers, sea and air.

As the superannuation rip-off shows, whatever small gains workers can achieve in this system are soon taken back, the goal-posts keep moving and insecurity returns. Capitalism cannot be reformed, regulated or resurrected, it must be abolished.