SUBJECTS: Superannuation system, Superannuation Guarantee, lost super accounts, Henry Review, Cooper Review
HOST:
You're leading the push for an overhaul of superannuation laws. Is this your position on that? I mean, are you convinced that the super is disadvantaging middle and low income earners?
CHRIS BOWEN:
Well look, what I think is this. Superannuation has served Australia very well. It's increased the retirement incomes of average Australians, it's put a lot of money into this parcel of the Australian economy. It's been a very good thing all in all. Of course, people had reduced returns over the last two years as a result of the stockmarket crash around the world, but we've got to keep everything in perspective. Superannuation has been a very good thing, but it's now almost 20 years old. It's time to see how we can improve it, so we've got two reviews underway in superannuation and what I did yesterday was outline what our criteria will be for assessing improvements. And I think we can make super a lot more efficient.
HOST:
How?
BOWEN:
A couple of examples: I think there's too much paperwork, I think it's too hard to roll over your funds when you change jobs. I think it puts people off.
HOST:
That is a pain. That's a complete pain.
BOWEN:
And look, often you've got to provide identification. I think we can do better, and as a result of that, we have billions and billion of dollars sitting in funds which people have lost contact with. So you might do a job for a couple of years, and then move on. When you change jobs, you've got a lot of things on your mind. The last thing you want to do is be filling out paperwork, and then you forget about your fund. You might move house and forget to turn your superannuation fund, and as a result, billions of dollars are lost and people aren't really getting their maximum retirement income. So I really want to see the system simplified, and that will put downward pressure on costs too, and mean that fees come down. And over time, you imagine over 30 years of that working, a very small reduction in your fees can lead to a very big increase in your retirement income. So that's one thing.
HOST:
So the guarantee of nine percent, that would change? It would have to change, I guess.
BOWEN:
What I've said on this is that I think we can, it's time for a national discussion about the adequacy of our superannuation retirement, that we can do better. What I've said is two things: simplicity and efficiency are the first two and secondly, you've got equity and adequacy. As you point out, yes, the tax concessions are much higher for people on much higher incomes because you pay 15 percent tax and that's a very big reduction for someone in the top tax rate. It's no reduction for somebody on the bottom tax rate. So I think we need to have a good look at that as part of our Henry Review, and that's what's happening.
HOST:
What do you say about Paul Keating saying we should be near 15 percent with our guarantee?
BOWEN:
Well look, that was Paul Keating's plan when he was in Government many years ago. I think it would have been better if that had been implemented then. If it had been implemented over the last 11 or 12 years, I think that would have been a better thing.
HOST:
Gradually.
BOWEN:
Yeah, gradually. And I think if you did do that, you'd need to do it very gradually over time. But I think what we need to do is have a good look at that question, the tax question, and just what we want to get out of our superannuation system, and all those things need to be on the table.
HOST:
Yeah, because you know, I don't think businesses can stand too many more imposts on it.
BOWEN:
No. Well look, this was the argument when superannuation was first introduced, of course. People said, 'oh hang on a sec, that's a nine percent tax on employment and it will affect employment', and of course it didn't because what happened was employers said, 'well we're going to put nine percent into your super so we're going to take that into account when we're working out your pay rise'. So of course at the end of the day, it all balances out. But that does mean there's a trade off between a higher post-retirement income and a pre-retirement income. So that effectively you get a higher income after you've retired by putting extra money aside before you retire.
And that's why I'm saying I'm not wedded to any particular view, but what I do think we need to do is use these two reviews – what we call the Henry Review and the Cooper Review – to have a good look at these issues: efficiency and just how adequate our retirement incomes are, and whether we can do a bit better, whether we can get our retirement to be a bit more comfortable by changing, recalibrating the system. I'm not talking about starting again, about going back to basics. I'm talking about, well, now it's 20 years old, it's a good chance to –
HOST:
An overhaul. Do you have a time limit on it? When do you want this to happen? You set yourself a sunset clause.
BOWEN:
Well look, we're getting the result of the Henry Review later in the year. The Cooper Review's reporting through this year, so by next year we'll have a pretty fair idea about where we want to take the system into the future.
HOST:
Alright, Chris Bowen, Federal Minister for Superannuation, thank you very much for your time this morning.