I'm delighted to have been invited to this SuperRatings Conference to share some thoughts on the Rudd Government's approach to the future of superannuation.
I notice that today's conference has been billed as "A Day of Confrontation" — with the kicker that the speakers are "not afraid to tell you what they think".
And, entering into a crucial period of dialogue about the future of super, as we have, I welcome that.
Whatever your thoughts on the direction super needs to take now, though, one thing that cannot be doubted is Labor's long-standing and ongoing commitment to superannuation.
As a party, we have, for decades now, understood the value of superannuation and recognised the benefits it brings to all levels of the economy – from ordinary working Australians, who are able to provide for themselves in retirement, to the funds management industry, which has boomed in this country and developed invaluable expertise, to the important long-term effects on national saving and the budget bottom line.
The introduction of the Superannuation Guarantee is among the most significant reforms — if not the most significant reform — of the Hawke/Keating Governments.
Just over 20 years ago, a Labor backbencher, preparing to become Prime Minister in a few months' time, gave a speech to the National Press Club arguing for a national system of superannuation.
It was a very controversial proposal at the time.
When Paul Keating argued that a national retirement income savings system would take pressure off the age pension, provide average Australians with a more comfortable retirement and provide a pool of savings at the disposal of the Australian economy, many questioned his approach.
And when Prime Minister Keating introduced the compulsory superannuation legislation, the then Opposition fought it all the way.
The Opposition argued vehemently that it was an unwarranted attack on individual rights and would be a tax on employment. One Liberal MP, a young Member for Higgins, argued that, based on a technicality, the Governor-General should not sign the Bill into law.
Now I'm not suggesting that those who now claim to be the protectors of superannuation were absent at its creation.
On the contrary. They were there, front and centre, as warriors against its creation.
So you can understand my cynicism when I see some of those warriors now posing the question "Can superannuation survive Labor?"
But the main reason for recapping history today is to underline the point that the Labor Government — and myself as superannuation minister — take our role as guardians of the Keating legacy of superannuation very seriously.
I have mentioned that compulsory superannuation is amongst Labor's most significant reforms.
I say that because it has had a far-reaching effect on the Australian economy.
As a country, we have the fourth largest pool of funds under management in the world, in large part thanks to our far-sighted compulsory superannuation scheme.
The skills that have been built up in managing this massive pool of funds in Australia have been a vital factor in positioning this nation as a financial services hub in the Asia-Pacific.
Certainly, superannuation has given – and will increasingly give – average Australians the opportunity to enjoy a more comfortable retirement than the age pension alone would – or could – provide.
But, more than that, the pool of funds created by superannuation has been at the disposal of the Australian economy. This is one of the reasons why Australia has weathered the global financial crisis so well. At a time when credit conditions around the world have tightened, Australian listed companies raised $90 billion of equity in the 2009 financial year.
Let me put this in context. In the past year, at the height of the financial and liquidity crisis, a greater proportion of the total market capitalisation of listed companies was raised in Australia than in any other major economy.
It is an achievement which would have been simply impossible in the pre-compulsory superannuation era.
I don't think too many people in this room would disagree with me when I talk about the importance of superannuation.
But what about the future?
Over the past three months, some people have suggested that it must be a difficult time to be Minister for Superannuation, when the Cooper and Henry reviews may stymie the capacity for action.
I have the opposite view.
This is a time of great potential for super. We have an opportunity to rejuvenate the system, to drive more efficiencies and to have a national discussion about adequacy.
Rather than looking at the two Government-instigated reviews – the Cooper review into governance and efficiency, and the Henry tax review, which also deals with adequacy – as potentially stifling progress, we should see them as an opportunity for bringing greater certainty to superannuation policy.
Annual Budget night changes to the superannuation system have been the norm for at least the last decade.
But, by conducting these thorough reviews and responding to their findings, the Government wants to reach a place where our policy settings are well understood, where their rationale is well-established and where the need for annual changes to tax and other settings is reduced or eliminated.
I do think we need a period of policy stability for super. And these reviews, once completed and worked through, are the best way to get it.
There will be a number of principles that the Government will consider when deciding whether to accept or reject the recommendations of these reviews.
We will want to assess the recommendations against the criteria of promoting simplicity, efficiency, equity and of course adequacy.
The questions of simplicity and efficiency are intrinsically linked. The superannuation system has developed into a complex creature, one that is just too difficult for individuals and employers to navigate. Things that should be easy, like rolling over funds, are simply too difficult.
We can't complain that Australians don't pay close attention to their superannuation when we veil it in complex terms and make it hard for them to understand.
A simpler system, which is easy for the average Australian to understand, would create a greater potential for more voluntary contributions and encourage Australians to become more engaged in thinking about their retirement income circumstances.
A more efficient system would not only be easier for employers to use, but also create efficiencies which should lower costs, and therefore lower fees.
As one industry player remarked to me recently, to walk into the operations centre for many super funds is to step back in time to 1982. Between us, we must do better.
The benefits of a greater use of electronic transactions in the superannuation industry are obvious. In addition to making superannuation contributions in a more timely fashion, we would see an improvement in the quality of information in the superannuation system, reducing costs and improving returns to members.
The potential is much greater than what has been achieved so far.
The Government's clearing house initiative will make it easier for small employers to make their superannuation payments. I see this as an important measure but a modest one, compared with the far greater efficiencies that the sector needs to embrace and the Government needs to encourage.
Just as efficiency and simplicity are fundamentally linked – so, in my view, are equity and adequacy.
As you would be aware, the interim report of the Henry Review found that a contribution rate of nine per cent provides for an adequate retirement income for most people.
I know that this a very controversial view, and I would expect arguments about it to continue.
I believe that adequacy should be the minimum objective for retirement incomes.
In other words, putting aside the debate over whether a nine per cent Superannuation Guarantee provides for an adequate retirement, we need a national discussion about whether to aim for something better than adequacy.
We need to talk about further growing the pool of savings at the disposal of the economy and giving average Australians a retirement that is perhaps better than "adequate".
We need to engage Australians in a conversation about what is the best way to ensure people have enough income to enjoy their retirement and also have enough to enjoy their working life.
Another, related part of this national discussion needs to be equity.
High income earners saving through super grows the pool of national savings, which, as I've already pointed out, has many benefits for our local economy.
But these high income earners were unlikely to ever trouble their local Centrelink office in any event.
It is the improved retirement savings of low and middle income earners that will reduce the cost of the age pension, providing relief to the taxpayers of the future.
Yet it is often the low and middle income earners who get overlooked in these kinds of debates.
Tax concessions for low and middle income earners to save through super are less than those for high income earners. The fact that the top five per cent of contributors make around a quarter of all concessional contributions to superannuation — while 1.2 million people do not receive an income tax benefit on their concessional contributions — is a compelling one.
So equity will also be a driving factor in our discussions about the eventual recommendations of the Henry review and the debate on adequacy more generally.
As you are all aware, the Cooper Review — formally known as the review into the governance, efficiency, structure and operation of Australia's superannuation system — is looking the efficiency of the super system.
Headed by Jeremy Cooper, the review has been asked to recommend ways to ensure that the superannuation system operates in the most cost-effective manner, and in the best interests of all its members.
Specifically, the review will look for ways of increasing efficiencies, reducing costs and fees, and lifting long‑term rates of return.
The Cooper Review will give us a better understanding of the drivers of superannuation costs and explore options for improving the performance of the sector. It will examine a range of aspects, including how fees compare internationally, whether people understand them and how they can be reduced.
Lower fees and commissions can significantly increase a fund member's retirement income and a retiree's returns.
Treasury estimates that an additional one per cent in superannuation fees and charges decreases the superannuant's lump sum at retirement by about 16 per cent.
In other words, if we can achieve even a small reduction in fees by improving the efficiency of the superannuation system, we can significantly increase retirement incomes over time.
The Cooper Review is considering a range of superannuation issues in three phases: governance; operation and efficiency; and structure.
In the meantime, I encourage you all to interact with the Review and have your say. We have a world-leading superannuation industry, which you are all central to. This time of review is your chance to help shape the future of the industry and ensure it continues to be the envy of others around the world and provides the best standard of living for Australian retirees.
As well as encouraging the super industry to introduce more competitive fees and charges, we are working to improve consumer protection standards.
I mentioned earlier that the average Australian finds it difficult to understand the details of their super investment.
One of the reasons for this is lengthy and complex disclosure documents.
This is why we set up the Financial Services Working Group to facilitate short, simple and readable disclosure documents for financial services products.
The working group is examining the appropriate disclosure of fees, charges and adviser remuneration relating to superannuation funds and other financial products. Extensive audience testing will help to ensure that future super disclosure documents will be genuinely helpful to consumers.
Ladies and gentlemen, earlier I mentioned the Labor legacy of championing superannuation for all Australians. And I have great pride in carrying on that tradition.
As I have said, the introduction of compulsory super has had a significant and continuing impact on Australia's economic health, and the retirement savings of Australian workers.
While the global financial crisis has had a significant impact on superannuation investment returns in the last year or two, the prospects are still good.
SuperRatings' own data on fund performance shows that, for the 50 largest funds reviewed, the median balanced investment option rose by 3.12 per cent in August 2009. The medium to long-term results for these balanced investment options showed average compound annual returns of 5.4 per cent over both the past five and 10 year periods.
That's a healthy result in the current economic climate.
I should also add that the global financial crisis has provided cash-rich super funds with new investment opportunities.
Looking ahead, the Cooper and Henry reviews will help us to make a good thing even better.
To strengthen our retirement income system, to ensure it is more efficient and more equitable and to provide all Australians with a more comfortable future.
That's the Labor tradition, the legacy of Paul Keating, one I'm determined to uphold and build upon.
I look forward to a Labor Superannuation Minister 20 years from now reflecting on what we will achieve during this crucial period of reform and pointing to it as further evidence of Labor's commitment to sustainable, equitable and nationally-valuable superannuation.
Thank you.