CHRIS SMITH:
Now, a lot of talk around today about superannuation. And in the last, I guess, four or five weeks there has been talk - I notice there have been stories in various newspapers; today a story in the Australian Financial Review. There are calls for super rules to be overhauled as soon as possible to streamline the system and make it more cost effective.
The Productivity Commission has had a go at the Government for moving too slowly to fix up problems that cost the industry up to $350 million a year. And if expenses are cut that would probably lead to lower fees for account holders too.
See, we've been promised lower fees for so long, it started with Peter Costello and it has continued under the Rudd and Gillard governments.
This is something that could, for a lot of people, make a big difference: being able to be part of an account in a superannuation fund where you simply don't - or are not weighed down by heavy fees.
Assistant Treasurer and Superannuation Minister, Bill Shorten, has promised to simplify the system soon. Let's try and get some specifics on that. The minister is on the line.
Minister, good afternoon.
BILL SHORTEN:
Good afternoon Chris.
CHRIS SMITH:
Thank you very much for your time. What changes are you planning on making and how many superannuants will it actually affect, do you think?
BILL SHORTEN:
Well, the first thing is that superannuation has almost had so many changes that people are just fed up with the amount of uncertainty. So I think that when I talk about any changes, it's got to pass a bit of a test that it makes life cheaper and it makes life more certain.
So the specific answer to your question how many people will be affected, we are proposing three or four core changes.
One is we want to increase the compulsory contribution that people get paid in their super from nine to 12 per cent. That's going to affect 8.5 million people, in a good way.
CHRIS SMITH:
Which was telegraphed and has been telegraphed for a few months. Got that one, yep.
BILL SHORTEN:
The next big one though which - and the Government in its first term commissioned a chap called Jeremy Cooper to do something which is now called the Cooper report, looking at how else can you make superannuation better. And in particular there are some reforms which we committed to doing and now it's been given to me, the job of actually doing what we said we'd do, which would be to see a new product offered by retail and industry and superannuation funds called MySuper. What MySuper means is that if you're not someone who is actively engaged in your superannuation fund, then you shouldn't be charged fees as if you are. So we're asking superannuation funds that they create a default product for people which would be low fees.
I mean, at the moment I think people would be surprised to know that the average cost of a superannuation fund is $85 a month in fees. Now, for some people, they're just - they're getting charged for work that they're not…
CHRIS SMITH:
Well, the work is not…
BILL SHORTEN:
…[indistinct] is not getting done.
CHRIS SMITH:
There's nothing being done. And, see, they often say, oh, to manage your account this is what's happened. Well, all they've managed to do is make sure they sign us up for another year.
BILL SHORTEN:
Yeah. I mean, fair enough for people who get on and - on the internet and engage on a daily or a very regular basis…
CHRIS SMITH:
Sure.
BILL SHORTEN:
But there are other people, and that's fair enough, who just want to be comfortable that the money is being invested, that it's secure, and that it's earning a return. And beyond that people get on with their day jobs.
CHRIS SMITH:
Okay. That's two points.
BILL SHORTEN:
The next issue which we are also working on has a ban on commissions and conflicted remuneration structures in the retail distribution and financial advice area. And the sector said, fair enough, the people in financial services. Not everyone is completely happy but people are saying let's do that and let's go on making sure that there's reform of the fees of financial planners. And that is happening.
And in saying that, Chris, I should also make it very clear financial planners have a fundamental and important role in the provision of advice to consumers. But it's important that their fee - that the fees they charge be transparent.
CHRIS SMITH:
Too right.
BILL SHORTEN:
So that's the third thing we're doing.
The next thing which we are also looking at doing - this is perhaps not as sexy - is trying to improve the back office functions of superannuation funds, and it's called SuperStream. We're trying to see if the administrative services of superannuation can't be delivered more cost effectively.
CHRIS SMITH:
This was suggested in the Cooper inquiry too, wasn't it?
BILL SHORTEN:
Yes, that's right. And specifically what that means is between the MySuper, if you're 30 years old, and you work on average wages, your retirement savings should be lifted by $100,000 plus per year. Plus the SuperStream improvements, we think that should increase the value of accounts on average about $40,000.
Another specific real issue is the issue of people who are over the age of 50, and for them they take - in my experience the closer you are to retirement the more you pay attention to your retirement income.
CHRIS SMITH:
All of a sudden, yeah.
BILL SHORTEN:
And that's right. And what it means is that we're proposing to introduce the following specific benefit: that people can contribute up to $50,000 a year into their superannuation - I mean, if they earn that much and they can organise their savings - and they can do so each year and get the concessional tax advantage up til their account is topping out at half a million dollars.
CHRIS SMITH:
Okay.
BILL SHORTEN:
So that's an incentive in the system…
CHRIS SMITH:
Okay, when? When?
BILL SHORTEN:
Well, that exists now. And what had happened is previously the Government have said that we were going to drop that down to $25,000. And, upon reflection, Government realises we want to be encouraging people closer to retirement to save more. So from 2012 we're keeping - the changes we'd said we were cutting back that concessional treatment, we've scrapped that. And so that system is in place and will continue.
In terms of another change, we're saying that people who are between - and it's not a lar… we think in that group I just went through, that's about 275,000 people will be positively affected.
We're also proposing that just because you turn 70, if you're still working you should still be eligible for superannuation. Once upon a time the view was that once you hit what was the retirement age and you kept working you didn't get superannuation…
CHRIS SMITH:
That's right.
BILL SHORTEN:
We've now introduced a measure that people from age 70 to 74, if they keep working they can get superannuation. And that will affect, we estimate, 33,000 people.
Another thing we're doing to simplify superannuation is we are trying to improve the opportunities for people who are in the lower income bracket, to be able to get increased contributions.
CHRIS SMITH:
So are you able to move on all of these changes sooner rather than later?
BILL SHORTEN:
Yes…
CHRIS SMITH:
Because there's a lot on the Government's agenda at the moment, as you know.
BILL SHORTEN:
Absolutely there is. But superannuation is one of the key - I guess we can talk in two and a half, three years time at the end of this term of government, Chris. But I would want you to be able to interview me then and say, hey, well, on superannuation all of the measures that we spoke about are being implemented; those ones I went through.
The other thing I should say though is if we increase the compulsory superannuation, if we maintain the concessional - people over 50 being able to put a decent whack of money into their super, if we're able to make it easier for people on low incomes to get more super, part of the way we will fund these changes is through the successful conclusion of the minerals rent resource tax.
So what I would say is to perhaps the people who in touch with the Liberal Party in the Opposition who listen to your show, hey, the superannuation changes actually make sense, they're a good idea. And that when we're talking about the taxation revenue of Australia and bedding down the mineral rent resources tax, the money is going to go to a pretty good purpose which is to secure the adequacy of people's retirement savings.
CHRIS SMITH:
Okay. Now, while I've got you here, with your involvement with Beaconsfield you must have had your eyes on Chile in the last two days. What an amazing escape for these 33 miners.
BILL SHORTEN:
Yes, it's quite amazing. I just take my hat off to the rescue authorities, the families and indeed the men who were trapped down below. It's just a remarkable story of triumph. It's just fantastic. I've watched the - all the way through and from what those families in particular have been on, initially wondering if the blokes were alive then finding out they're alive, then you hit a high, then you hit… then all of a sudden you realise the rescue is going to take a long time. Up and down like a rollercoaster. And the psychological wellbeing of those blokes has got to be a first order issue, I'm sure, for authorities and the company.
CHRIS SMITH:
Just quickly, earlier this afternoon Bob Katter came into my studio talking about the cuts to water allocations in the Murray Darling Basin.
As the Assistant Treasurer, are you concerned about the cost of these cuts to regional productivity? Because as it stands, and I know there'll be amendments and we know that this is part of an ongoing inquiry, and two inquiries at the moment, are you concerned that we are somehow damaging regional productivity? We should be making these areas the food bowl of the world, not making it more difficult for growers.
BILL SHORTEN:
There's a number of points in what you say there, Chris. The importance of regional Australia the Government gets, and we should be supporting our food producing areas. And that's what the Government is trying to do by tackling the hard issue of the Murray Darling Basin. It's been often talked about.
But just know - I was listening very carefully to what Bob says, Bob Katter. The minister in charge, Tony Burke, has made it clear that there can be no reform until late in 2011. So we've got a long period of time of just talking through the issues. And I have no doubt that the Government will listen pretty carefully to all the observations. And - you've got to start the ball somewhere, get the ball rolling, and you've got to also make sure you take on board the views of the growers who you're talking about.
We'll - this is not the end of the story. I know there's a lot of heat and light at the moment.
CHRIS SMITH:
Well, there's a lot of people offside. It's not a clever way to start a negotiation though.
BILL SHORTEN:
Well, I think it's - I don't know if I'd categorise this a negotiation. I just think it's a straight forward listening process. And, yeah, fair enough, if people are uptight, they're uptight, and I can respect that.
So it's not how you start a race, it's how you finish it.
CHRIS SMITH:
Alright. Thank you for that rundown of super, and I will contact you and interview you in two years time. I'll put it in my diary on my mobile phone.
BILL SHORTEN:
Maybe even before then, Chris, if you want. Cheers.
CHRIS SMITH:
Thank you for your time.
BILL SHORTEN:
Bye-bye.
CHRIS SMITH:
There you go. There's a little bit of a rundown, a little bit of a scan of what we have now in the mind of the Superannuation Minister, following the Cooper report.
Sometimes when we start focusing on the big ticket numbers we lose sight of the things that so much work has been done on, and something that affects so many people, superannuation. And I won't be doing that with that topic. So I was glad we got Bill Shorten on this afternoon.