Former prime minister Paul Keating has reignited claims a rise in the superannuation guarantee is the only way Australians are going to be able to adequately afford retirement without overburdening the pension system.
Speaking exclusively in depth to ABC’s 7.30 for The Future of Retirement, a four-part series presented by Alan Kohler, Mr Keating said: “The only way that ordinary working men and women are going to get any benefit from their own labour is the 2.5 per cent super [rise].”
“If they don’t get the 2.5 per cent super, they get nothing.”
Currently, an employer has to pay an eligible employee 9.5 per cent of their earnings for ordinary hours of work into a superannuation account.
The super guarantee is legislated to increase to 12 per cent by 2025, but there is now a question as to whether the government will proceed with the rise.
But Mr Keating argued the optimal percentage would actually be closer to 15 per cent.
“The parliamentarians … are on 15 [per cent] – 15.4, in fact,” he said.
“Particularly now, as earnings – yields from shares, yields from equities, and bond yields – have fallen so far, there’s no way a funded 9.5 per cent can give you the kind of accumulation I believe you need. So the answer is 15 [per cent].”
‘Working people have been robbed’: Keating
As the architect of Australia’s superannuation system, Mr Keating says the legislated superannuation rise is owed to Australians.
“Since 2013, there’s been a 10 per cent increase in labour productivity … [none] of it went to wages,” he told 7.30.
“It’s all gone to the balance sheet of companies. It’s all gone to profits. So working people have been robbed in terms of real wage adjustments.”
The government commissioned a review of the entire retirement system in a 600-page document that was handed down in November last year. But it is yet to announce how it is going to put it into practice.
The report was chaired by former treasurer Peter Costello’s chief of staff, Mike Callaghan, who also spoke in depth to 7.30.
“All of the evidence suggests that increases in the SG (superannuation guarantee) do come at the expense of future wages growth,” Mr Callaghan said.
“This is over the long term. That is a very important proposition that underlines what your objectives for the retirement income system would be and how you would define an adequate retirement income.”
But Mr Keating has dismissed the impact of increasing super on wage growth as “complete nonsense”.
“On their reasoning, we should have seen real wage increases,” he said.
“It’s been [a] zero real wage increase for eight years.”
Minister for Superannuation Jane Hume said while the superannuation rise was legislated to occur, a decision would be made closer to the deadline.
“The Prime Minister has said very clearly that he will make a decision closer to the time,” she said.
“And the reason why he’ll make a decision close to the time is because he has to consider the economic circumstances that are relevant at that point in time.
“But that said, the rise is legislated. Undoing legislation, by its very nature, is a difficult thing to do.”
‘I can’t even get a pay increase’
Aged care nurse Sue Walton said not increasing the super guarantee would be “disgraceful”.
“They can’t keep penalising us year in year, year out … I can’t even get a pay increase that was promised to me,” she told 7.30.
The grandmother of nine does not have enough money in her superannuation to survive without the pension.
“I only have approximately $68,000 in my superannuation,” she said.
“I’m going to be in trouble when I retire.
“When I was in my 40s, I was on track for retirement. Unfortunately I got divorced and I started over again.”
“Not having enough money for your retirement is frightening, devastating, [and] plays on your mind all the time.”
Women would benefit from changes to super
According to Australian Taxation Office (ATO) data from 2017-18, the average balance for those with superannuation at age 60 to 64 was $279,167 for women and $344,718 for men – a gap of 19 per cent.
For many, this will not be enough for a comfortable retirement, with 67 per cent of Australians over 65 relying on the aged pension in some form.
Mr Callaghan said women in particular would benefit from changes to the retirement system.
“If the $450 a month threshold for when superannuation contributions are paid, if that was removed, that would benefit more women than men, because more women are on lower incomes [and] are caught by that,” Mr Callaghan said.
“If superannuation contributions were paid on all parental leave, again, women would benefit.”
Mr Callaghan said changes to divorce proceedings would also help with superannuation equality between men and women.
“In divorce proceedings it’s usually the woman [who] misses out on more of the superannuation, mainly because the amount of superannuation isn’t disclosed,” he said.
“The ATO can provide that information to the family court proceedings. There have been measures that have been talked about in parliament, not yet introduced, but little things like that would help address some of these inequities between men and women.”
Inefficiencies in the system
The federal government is seeking to address a number of structural inefficiencies within the superannuation system with a series of reforms called Your Future, Your Super – due to be implemented in July.
“If you’re in an underperforming fund, your fund will have to tell you,” Ms Hume said.
“They will have to notify the members and say, ‘Hey, we haven’t lived up to expectations.’
“Part of that notification is a direction to go to the online comparison tool so you can see whether your fund is not right for you.
“Maybe you want to switch and there’ll be an opportunity to do that via that website as well.”
While issues like high fees, underperforming and duplicate funds are under the spotlight with the current reforms, when it comes to the fundamentals of the superannuation system, Mr Keating says he does not think he would do anything differently – even with 30 years of hindsight.
“If you look at the Norwegian fund or the Dutch fund or what would have been the Hancock fund … your wages are levied at a certain amount. It goes into a national fund,” Mr Keating said.
“The fund is managed by the government and you get a pension from it.
“I didn’t want that. What I wanted was you got your pension from it, but you own the capital.
“Can we guarantee that the pension will even remain as generous as it is today? That’s the big question. That’s why nothing beats self-provision.
“What superannuation is about is personal empowerment … you shouldn’t be forced to eat your own home.”
The Future of Retirement, a four-part special presented by Alan Kohler, begins tonight on 7.30. Watch it on ABC TV or iview.
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