Pension bores are fond of declaring Australia’s compulsory superannuation system the envy of the world.

They would have you believe it was the latest in a long line of man’s greatest achievements, up there with the invention of the wheel and universal suffrage.

As tempting as it is to try to debunk these pension bores, the fact is they have a point: the Aussie super system is really quite special.

That’s not to say it doesn’t have its problems. The tax treatment of super remains unnecessarily expensive – even after Malcolm Turnbull’s lifetime cap – and the retirement phase is fairly primitive.

But it has one huge advantage: it is compulsory. And the value of compulsion comes into sharp relief when you look at the UK, where contributing to a pension is voluntary.

Why compulsion is such a great idea

Paul Keating championed the super guarantee in Australia. Photo: AAP

Compulsory workplace superannuation – or the super guarantee – was introduced by the Labor government in 1992 following a major campaign through the 1980s led by the union movement.

As Alex Dunnin, director of research at superannuation research firm Rainmaker, explains, business and the conservative side of politics hated the idea.

“Compulsory superannuation is by its nature state intervention, the big hand of government, a suppression of personal freedom and anti-competitive so it’s no surprise it took conservatives a while to get on board,” Mr Dunnin told The New Daily.

“It’s a classic tension of government policy needing to be heavy to act in the nation’s long-term interest at the cost of normal principles of freedom.”

In the end, business and conservatives came around (largely, says Mr Dunnin, because of the generous tax concessions) and 24 years later, the system is popular and thriving.

Not so in the UK.

British unions were crushed by The Iron Lady, resulting in no push for compulsory super. Photo: Getty

Thanks to Margaret Thatcher’s decimation of British unions in the 1980s, there is no strong labour movement to push for compulsion the way Aussie unions did.

In fact, in the early nineties, at the very same time that millions of Australian workers were joining super funds, British workers were doing the opposite.

Between 1991 and 2012, the number of private sector workers saving into a workplace pension fell from 6.5 million to 2.7 million, according to the Pension Policy Institute.

This was a disastrous trend, given this generation of workers would live longer than any in history, and would desperately need a private pension.

Things took a turn for the better in 2012, with the introduction of ‘auto-enrolment’, which is basically a weaker version of the super guarantee. Workers are automatically enrolled into a pension scheme and contribute 3 per cent of their salary – but have the ability to opt out.

Given how low wages are in the UK compared to Australia, and how fragile the economy is following the GFC, and now Brexit, it may be too little too late, particularly for gens X and Y.

Which brings us to the next point …

The problem of longevity

The United Kingdom is facing a pension crisis. Photo: Getty

Longevity is a challenge to Australia’s super system; but it’s not a constitutional threat like it is in the UK.

That’s because, unlike Australia, more than 50 per cent of the UK’s pension system is made up of ‘defined benefit’ (DB) or ‘final salary’ pension schemes.

Run by individual companies for their employees, DB schemes promise to pay a fixed pension to members until death.

They were a jolly good wheeze in the old days, when people died a few years after they retired. But now people are living 25 years or more into retirement, DB schemes are looking like a pretty dumb idea.

Companies must now pour money into the schemes to pay the generous pensions of their stubbornly rosy-cheeked ex-employees.

As former UK Conservative minister David Willetts recently pointed out, this is money that could be going towards higher wages for chronically low-paid younger workers – who, by the way, will never get the benefits themselves, because the schemes are all closed to new members.

Thanks to increased longevity, rock-bottom returns on investments, and nearly a decade of insipid economic growth, these DB schemes are now so expensive they are singlehandedly causing some businesses to go bust (the recent collapse of retail giant BHS is a prime example).

Australia doesn’t have this problem. Almost 90 per cent of super funds are ‘defined contribution’, which means each member has her own pot of money, which is all hers when she retires. That is much more economically sustainable.

The downside, however, is that individuals run the risk of running out of money if they live too long. Hopefully, the more mature and better designed the system becomes, the less of a risk this will be. And the age pension remains the safety net.

Which all boils down to the following: the UK is certain to face a devastating pension crisis in the years ahead.

Thanks to the super guarantee, Australia isn’t.