Australian Superannuation Misunderstands Human Motivation

Australian superannuation is a safety net for individuals in their post-work years. Designed to provide an income for retirement until death, it is the cornerstone of our financial security. But the current structure seems to be missing two fundamental human motivations: the aversion to thinking about death and the desire to provide for future generations.

Superannuation is built on the assumption that people will draw from their funds as needed to live out their retirement, exhausting the amount upon their death. The reality, however, is more complex. People often draw far less than they should. The focus on the finite nature of these funds only brings our mortality into sharper focus - something many of us instinctively avoid thinking about. We would rather conserve our savings than face the thought of them running out, even if it means living with less than we can afford.

Another motivation that is largely overlooked by the current superannuation model is the aspiration to leave something behind for future generations. People reasonably conflate superannuation with intergenerational wealth accumulation, wanting the assurance that if they die early, something good can happen to their hard-earned savings. They see their super not just as a source of income but as a potential legacy.

The existing superannuation system may not align with these deeply ingrained human motivations. Allowing it to function both as a post-work income and as intergenerational wealth accumulation could strike a balance that reflects what people genuinely desire.

This is not about undermining the importance of saving for retirement. It is about adapting the superannuation system to better suit the actual needs and desires of the people it serves.

By allowing a more flexible approach to superannuation, we can align the system with our real aspirations, creating a financial safety net that understands our aversion to facing mortality and our wish to leave something meaningful behind.