ELLEN FANNING:
As the architect of compulsory superannuation, Paul Keating had a vision that every working Australian should have 15 per cent of their pay going into retirement savings. He thought that would make us self-sufficient in our later years.
But the new Labor Government holds no such dream for the time being, at least. It believes 15 per cent super would be just too expensive to introduce, so it's searching for ultimate ways to boost peoples' savings that would be easier on the Government purse. More from Ross Greenwood.
ROSS GREENWOOD:
For those on middle and low incomes, the future promises longer working lives, followed by an even tougher life of survival, funded by an age pension that provides less than the poverty line. And though the Federal Government's flush with cash, it's cautious about raising pension payments, or handing out more money, to boost super accounts.
NICK SHERRY:
The old Keating model was the 15 per cent, and to go to 15 per cent contributions involves some $5 to $6 billion in loss of revenue, and that's significant, obviously significant, and we didn't make any commitments to lift contributions prior to the election, and one of them was because of the sheer cost of it.
ROSS GREENWOOD:
So are you saying that the Labor Party, which created the compulsory superannuation system, now at nine per cent, has effectively given up the dream of people contributing 15 per cent, so that they're fully self-funding when they hit retirement, at the age of 60?
NICK SHERRY:
No, no, we haven't given it up, what I've indicated is that we should have a debate about adequacy in the medium-term, but there are a range of solutions, there are a range of different solutions, different models, I mean individuals, industry, put different models to me every day of the week, virtually.
ROSS GREENWOOD:
But the inequity of superannuation remains, those who are younger, and have more time in the workplace, will almost certainly build a bigger savings pot. For years it's been suggested that a person starting work at 20, needs to save 15 per cent of their pay every year, for 40 years, to be entirely self-sufficient in retirement. Most won't achieve that, meaning the pension system will remain the bread and butter for Australia. And we know what the price of bread and butter's been doing lately.
NICK SHERRY:
We do know that even with compulsory superannuation the nine per cent and whatever voluntary contributions, the age pension for low middle income earners in 30, 40, 50 years, is still going to be with us, so it's an add-on, it's not to replace the age pension for most Australians.
[Excerpt from A Current Affair forum]
REPORTER:
Surviving a week on the single age pension is almost impossible.
[Excerpt ends]
ROSS GREENWOOD:
This week, Channel Nine's A Current Affair, and radio presenter, Steve Price from 2UE, hosted a forum for pensioners in Parramatta, in New South Wales. For many of these, affording the every day cost of living on 25 per cent of the average male wage, has become almost unbearable.
[Excerpt from A Current Affair forum]
UNNAMED PENSIONERS:
Now I personally am on about $45 to $50 a fortnight medication. Now, I can't even afford to even buy it.
UNNAMED PENSIONERS:
I have to live with my son, because I just cannot afford private rental.
UNNAMED PENSIONERS:
We're in a critical state, people can't afford to live, they can't afford to pay rent, they can't afford to get their teeth fixed.
[Excerpt ends]
NICK SHERRY:
It is true that for older Australians, who have only been in the compulsory system at nine per cent, since July 1, 2002, their outcome, if they're going to retire in the next 10 years, is very modest, it would be in the tens of thousands of dollars, it's modest.
ROSS GREENWOOD:
Which is where the debate about equity in our retirement system starts. Are older Australians with no super, provided with enough for a dignified existence, especially with rising rents, fuel and food prices? Are lower and middle income working families given enough incentive to save, to give them a better chance of having more than just the age pension to survive on? And was the decision to allow wealthy Australians to have a tax-free life after the age of 60, the fairest method of retirement support?
Two weeks ago, Sunday ran a well sourced story, suggesting the Government wants a debate on that tax-free life style for the over-60s. But on the record, according to the Superannuation Minister, it's here to stay.
NICK SHERRY:
Well the issue of the taxation treatment post-retirement, I believe was settled by better super, the issues of tax treatment in those circumstances was settled, and as I say, from age 60, it's treated - the income stream is treated as tax free.
ROSS GREENWOOD:
These debating points though, including many raised by unions and the industry superfunds, means there are more changes ahead to super.
NICK SHERRY:
The key issue that the Labor Party has debated ongoing, including the union movement, has been the level of contributions. That has been the issue that everyone has been focused on when superannuation has been debated internally, and as I say, we would hope to have a process in the medium term, going forward, to deal with that issue.
ROSS GREENWOOD:
So when do you believe that those solutions will ultimately be brought down by this Government?
NICK SHERRY:
We haven't set a time line yet, so let's get the process underway, identify the different options, and then reach the conclusion. But it does need to be done in the next couple of years, I think.