Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

by leave—The Gillard government is committed to boosting the retirement savings of all Australians through reforms to Australia’s superannuation system. The government is committed to boosting the national savings of Australia through reforms to our superannuation system. The primary aim of superannuation is to help provide a means by which Australians can save for a dignified and comfortable retirement. Superannuation also has very positive impacts on the economy through increasing Australia’s national savings and reducing our reliance on foreign borrowing.

Australia has a three-pillar approach to retirement income. This approach ensures that retirement income policy is sustainable as our population ages. The three pillars are: voluntary superannuation and other private savings; compulsory superannuation savings through the superannuation guarantee (SG) system, complemented by concessional tax treatment; and a means tested taxpayer funded aged pension. Compulsory superannuation savings through the SG system in particular focuses on adequate retirement income.

The Gillard government plans to build national savings through our superannuation reforms. Australians today have over $1.2 trillion in superannuation savings. That is roughly the same size as our GDP. Australia’s total superannuation savings are estimated to increase to $6.1 trillion by 2035—including $500 billion from the government’s superannuation reforms. These reforms will assist in building a stronger, broader and more competitive economy.

At the time of the super guarantee system’s 1992 introduction, it was expected that the provision of wage increases through superannuation would provide significant benefits to employers, as well as employees. Employers would not incur the additional on-costs associated with a direct wage increase, such as workers compensation and payroll tax. At this point I want to pay tribute to former Prime Minister Paul Keating and former ACTU Secretary Bill Kelty for their foresight two and a bit decades ago to promote these issues. The grand bargain they helped deliver both between and for Australian workers, employers and taxpayers holds up as a powerful economic lesson for us today.

Between 1 July 1992 and 30 June 2003, when the superannuation guarantee was lifted to nine per cent, the Australian economy grew strongly. GDP growth averaged 3.9 per cent per annum. Unemployment fell from 11 to 6.1 per cent. Labour productivity grew very strongly, well above its 30-year average, at 2.2 per cent per annum. Unit labour costs fell over the period by 4.5 per cent. Real wages grew. Australian business profitability grew by 6.1 per cent per annum and profits rose as a percentage of the GDP. This is a strong record. And it is now time to reconstruct a broad consensus and write the next chapter on superannuation.

The government’s long-term superannuation reforms, announced on 2 May 2010, will deliver substantial improvements in retirement savings and a fairer distribution of superannuation tax concessions, ensuring more Australians can enjoy a comfortable and secure retirement. The reforms included changes to the SG arrangements, a government contribution to assist low-income earners and changes to superannuation caps to assist employees who are nearing retirement.

The Gillard government is increasing the superannuation guarantee rate from nine to 12 per cent to address issues raised by our ageing population and to boost private and national savings. This represents a major new investment in the long-term adequacy of Australian retirement savings. The government will also extend the SG arrangement to workers aged between 70 and 74, to apply from 1 July 2013. This measure will particularly assist older workers who perhaps missed out on superannuation during the earlier years of their working lives.

From 1 July 2012, the government is introducing an annual government contribution of up to $500 which will effectively return the tax payable on compulsory superannuation contributions made by or for workers on incomes up to $37,000 a year. This measure will provide a fairer distribution of superannuation tax concessions, as these employees do not currently receive tax incentives for saving through super.

From 1 July 2012, individuals aged over 50 with superannuation balances below $500,000 will be able to make up to $50,000 in concessional superannuation contributions annually. This doubles the cap of $25,000, which was scheduled to apply from 1 July 2012, and will allow these individuals to ‘catch up’ on their superannuation contributions when most able.

As a result of these reforms, approximately 8.4 million Australians will receive an increase in their retirement incomes, including 3.5 million Australians on lower incomes who do not receive tax incentives for saving through superannuation and older workers catching up on their retirement savings. For example, an employee now aged 30 on average full-time wages can expect to have an additional $108,000 in superannuation at retirement. Another example: a female aged 30 today on average full-time weekly earnings, but with an interrupted work pattern, can still expect to retire with an additional $78,000 in superannuation.

Under the Fairer, Simpler Superannuation package, the government announced it will introduce a new low-cost, simple product called MySuper from 1 July 2013. The introduction of MySuper forms the first part of the government’s response to the Super System Review (also known as the Cooper review) into our superannuation system. MySuper is designed to provide a simple, low-cost fund that has no unnecessary fees or charges and simple features that will make it easier to compare fund performance. It will replace existing default funds. Only those funds whose default product meets MySuper standards will be able to operate as a default fund.

Labor will introduce new standards that providers of MySuper products must meet, including:

• No entry fees, with exit fees limited to cost recovery.
• A ban on commissions and conflicted remuneration structures in relation to retail distribution and advice in line with the government’s financial advice reforms.
• New duties will require super fund providers to deliver value for money or be stripped of their licence by the regulator.
• A single, simple and easy-to-understand investment option designed to maximise a person’s retirement income.
• Standardised reporting requirements in plain English.

MySuper funds will be licensed by APRA, who will also monitor and publish MySuper fund investment returns and costs to ensure members are getting value for money. Anyone making contributions to super will be able to open a MySuper account.

The government also proposes to work with consumers, the superannuation industry and employers to modernise and streamline the administration of the superannuation system. An important first step in this process is the better use of tax file numbers to identify and consolidate member superannuation accounts, including lost accounts. An individual’s tax file number will be the primary identifier of member accounts, subject to strict conditions to ensure privacy and security of information.

The use of tax file numbers as primary account identifiers will commence from 1 July 2011. Superannuation funds will be able to offer MySuper products from 1 July 2013. Transfer to an account with the lower fees expected from the MySuper and SuperStream proposals is projected to increase the retirement benefit of a worker, now aged 30 and earning full-time average wages, by more than $40,000 by the time they retire.

The final report of the Cooper review was released on 5 July 2010 and outlines 177 recommendations, including the MySuper and SuperStream proposals, which I have outlined. We will respond to the remainder of the review’s recommendations by the end of 2010.

With regard to the government’s proposed SG changes, the superannuation industry, the wider financial services industry and employee representative bodies have all indicated their broad support for the proposed SG increase. And here I would also like to acknowledge the work of my predecessors in the superannuation portfolio—Chris Bowen and Nick Sherry.

In delivering this ministerial statement in this place I want to be clear that the time for a new consensus on super has arrived. My objective is not to be political—indeed we need to remove politics from superannuation.

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